After several months of development, the President of Indonesia has finally issued the newest Negative Investment List (Daftar Negatif Investasi or “DNI 2016”) on May 18, 2016, under Presidential Decree No. 44 of 2016. DNI 2016 effectively replaces the previous DNI, Presidential Decree No. 39 of 2014, starting May 22, 2016.
As previously described in this article, Foreign Direct Investment in Indonesia is only allowed in one form, which is for foreign investors to invest directly in a Foreign Direct Investment Company (Perseroan Terbatas Penanaman Modal Asing or “PT PMA”) as foreign shareholders. The implementation of DNI 2016 directly impacts the shareholding composition allowed for foreign investors in PT PMA established after the issuance of DNI 2016, while also noting the requirements applicable for PT PMA in Indonesia under the prevailing laws and regulations.
The revisions listed under DNI 2016 has been one of the most awaited government action by foreign investors all over the world looking forward to invest in Southeast Asia’s largest market. There are several notable sectors of attention, which SMART will discuss further about in this article.
1) Business Sectors Open to 100% Foreign Investment
Several business activities opened for 100% foreign shareholding composition based on DNI 2016 are as follows:
2) Business Sectors Previously Closed to Foreign Investment
DNI 2016 also opens up business activities previously closed to foreign investment for partial shareholding by foreign shareholders. They are as follows:
Aside from the two notable categories described above, DNI 2016 opens up several business sectors for increased shareholding percentage for foreign investors. But the opening of several critical business sectors such as Restaurants, Cafes, and Film Production to 100% foreign ownership definitely increases the attractiveness of Indonesia as an investment destination. Opening up Distribution and Cold Storage for businesses directly affiliated to Production/Manufacturing also simplifies the supply chain of trade, therefore making it much easier for foreign investors to realize the potential of the biggest archipelago in the world.
On the other hand, some business sectors previously closed to any foreign investment are now opened for partial foreign shareholding, and one with the most potential is Passenger Land Transport. With its huge number of population and large size of territory, Indonesia has high demand for sufficient passenger transport for its citizens, and it’s where foreign investors can take advantage of, by working together with established local companies.
DNI 2016 opens up new possibilities for foreign investors looking to invest in Indonesia, while also keeping the local businesses afloat in the midst of the implementation of ASEAN Economic Community currently in progress. While there are more business sectors foreign investors can now do business in, they must always keep in mind the obligations applicable for foreign direct investment companies or PT PMA, which are constantly supervised and enforced by BKPM. This includes the requirement for investment over IDR 10,000,000,000 per business activity, and the obligation to secure Permanent Business License (Izin Usaha Tetap) to continue their business operation in Indonesia.
HOW CAN SMART CONSULTING HELP YOU?
SMART Legal Consulting is an Indonesian Corporate Legal Services firm. We assist investors in establishing their business in Indonesia through various forms of investment, including setting up Perseroan Terbatas (PT), both local PT and PT PMA. Our knowledge, experience, and connections makes us the law firm to be your legal partner in Jakarta, managing your investments in Indonesia.
If you have any questions about PT PMA and its requirements, or want to book a consultation for assistance, you can arrange a meeting with SMART Legal Consulting at: