Negative List for Foreign Direct Investments

Foreign Direct Investments (FDI) is one of the way to improve national economy. Indonesia’s attitude towards FDI’s is relatively open and accepting. The government encourages foreign investors with invest in Indonesia by coming up with numerours policies to ease investments. Most recently, the government officialized the Economic Policy Package XVI with the three main points as follows:

  1. Expansion of Tax Holiday facilities
  2. Regulation of export revenue foreign exchange reserves for natural resources
  3. Investment Negative List Relaxation

The Investment Negative List is a list of names of business sectors created by the government that lists the maximum percentage limit of foreign ownership in a company of certain business sectors. There are even sectors that are completely restricted from investments, be it foreign or domestic. Because of that, the Negative List is one of the first things investors must find out before investing.

Then what does a negative list mean?

Indonesia follows the negative list approach. The negative list approach is a less strict approach compared to the positive list approach. With the positive list approach, only the sectors mentioned on the list are open for investments, while the sectors that aren’t mentioned are restricted. Whereas with the negative list approach, the sectors mentioned on the list are the ones open for investments with a percentage limit or completely that are completely restricted, while the sectors that aren’t mentioned on the list are 100% open for investments.

The Negative List for Indonesia can be found in Presidential Regulations, most recently Presidential Regulation No. 44 Year 2016. Though there are also some restrictions on foreign ownership in companies and investments that are mentioned outside of the Presidential Regulation. Namely, the restriction on companies that issue Electronic Money that is mentioned in Article 10 of the Bank of Indonesia Regulations No. 20/6/PBI/2018 on Electronic Money.

The contents of the Negative List changes according to the various circumstances of the country so as to full fill the purpose of its creation, that is to protect the Indonesian economy and to open business opportunities and investments. While the relaxing the Negative List may result in higher foreign investments, it may also affect local businesses negatively that aren’t able to compete. Thus investors must not only check the Negative List before deciding to invest, but also after investing, in order to monitor should there by any changes to the Negative List.

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