Indonesian New Negative List Investment 2016


News Update – Indonesian New Negative List Investment 2016


The President of the Republic of Indonesia has signed a Presidential Regulation No. 44 of 2016 on the List of Business Fields Closed to Investment and Business Fields Conditionally Open for Investment, otherwise known as the Negative Investment List (“New Negative List”) on 12 May 2016.  The New Negative List was made available to the public last week and the effective date of the New Negative List is 18 May 2016.

The New Negative List comes as part of the latest round of economic stimulus known as Economic Policy Package Vol. XII introduced by President Joko Widodo’s Government. Generally, the New Negative List is to open more sectors and ultimately it aims to attract more investment into Indonesia.

With the Government hopes to increase the country’s competitiveness, in terms of both the ASEAN Economic Community and the global economy, by offering better protection for strategic economic sectors and small-and medium-scale enterprises and cooperatives (“SME”). In order to achieve this objective, the New Negative List revises various components of the previous Presidential Regulation No. 39 of 2014 (“2014 Negative List”).


The New Negative List sets out three main Indonesian investment fields, namely:

  1. Business fields which are closed to investment, specifically business fields which are restricted for all investment activity (both foreign and domestic), as specified under Appendix I of the New Negative List;
  2. Business fields which are conditionally open to investment, including:
    • Business fields reserved for SMEs, as specified under Appendix II of the New Negative List; and
    • Business fields defined by certain requirements which have to be met, as specified under Appendix III of the New Negative List. These include requirements relating to ownership (i.e. foreign, domestic and ownership which relates to the ASEAN Economic Community – AEC), location and special licenses; and
  3. Business fields which are entirely open to investment, which are basically any businesses which do not fall into either category (a) or category (b) above.


The New Negative List has added a new business field which is closed to both foreign and domestic investment, namely the collection of valuable objects from sunken ships. Other business fields which are closed to investment under the New Negative List remain substantially similar to those set out in the 2014 Negative List.


The New Negative List specifies a total of 145 business fields which are either reserved for SMEs or which are reserved for SME’s partnership schemes. These business fields were basically regulated in the 2014 Negative List with similar specifications being set out. The core difference is the new separation of appendices.

Public Works

The New Negative List however has expanded the opportunities for SMEs in the public works sector. Previously, this restriction encompassed construction services with a value of IDR 1 billion at the most. The New Negative List has increased the reservation value for the SMEs to IDR 50 billion for construction services with low level of risk and consultation construction services to IDR10 billion.


The New Negative List now requires entities wishing to establish retail businesses involving postal delivery and internet ordering (online retail) to engage in partnerships with SMEs. Previously, this field was opened to domestic parties but it did not  include the obligation to engage in any partnership schemes with SMEs.


In general, Appendix III to the New Negative List incorporates substantially similar business sectors to those set out in Appendix II to the 2014 Negative List. However, several changes have been made to the investment conditions which have to be met by certain business fields, such as:


In general, the New Negative List does not change the foreign-investment capital for the agricultural sector in comparison with the 2014 Negative List. However, a number of changes have been made to the foreign-investment requirements which have to be met by several agricultural business fields, for example:

  1. The mandatory recommendation from the Minister of Agriculture for agricultural business fields which are opened to foreign investment has been amended, specifically: 1) Seeding and cultivation businesses for staple crops located in farming areas of 25 hectares or larger and 2) Industrial plantation seeding businesses located in farming areas of 25 hectares or larger; etc.
  2. The following conditions have now been imposed upon agricultural business fields which are opened up to 95% foreign investment: 1) Allocation of 20% of an investor’s plantation area to plasma plantations or 2) Use of raw materials amounting to at least 20% of the investor’s total area of plantation crops.


Under the New Negative List, the crumb-rubber sector is no longer reserved for domestic investors only. However, businesses are still required to secure licenses from the Ministry of Industry and also satisfy the following requirements relating to raw materials:

  1. At least 20% of any raw materials utilized should derive from the business’s own farm; and
  2. At least 80% of any raw materials utilized should be done so through partnership schemes made between a SME and the business in question, with at least 20% of any plantation area being set aside for plasma plantation farming.

Public Works

The New Negative List sets out two new sub-business fields relating to public-works sectors, specifically:

  1. Construction services which utilize advanced technologies and/or are considered high risk and/or have a value amounting to IDR 50 billion or more: foreign investment is allowed up to 67% for non-ASEAN countries or 70% for ASEAN countries; and
  2. Construction consultation services which utilize advanced technologies and/or are considered high risk and/or have a value amounting to IDR 50 billion or more: foreign investment is allowed up to 67% for non-ASEAN countries or 70% for ASEAN countries.


A number of changes have been made under the New Negative List which relates to trade-sector investment requirements, such as:

  1. The list has excluded direct selling and futures brokerages, which means that these business fields are now entirely opened to investment;
  2. The list adds a new business field, namely: department-store businesses of an area of between 400m2 to 2,000m2. This business field is now opened to foreign investment of up to 67% and requires the issuance of a license by the Minister of Trade, provided that the department store in question is located in a mall and that the addition of new outlet stores is to be based on pay performance; and
  3. Increases the foreign-investment capital for warehouse businesses or trade engaged in by distributors which are not related to any production processes, from 33% to 67%.

Tourism and Creative Economy

A number of changes have also been made to the New Negative List which relates to the tourism sector, specifically:

No. Sub-Business Field Foreign-Investment Capital
2016 New Negative List 2014 Negative List
1 Zero to two-star hotels and the management of historical sites (e.g. temples, palaces). 67% 51%
2 Motels, bowling alleys, billiard halls, golf courses, etc. 67% or 70%, for foreign investors from ASEAN country 49% or 51% for foreign investors that partner-up with SMEs
3 Museums and catering services 67% or 70%, for foreign investors from ASEAN country 51%

The New Negative List no longer incorporates film-production services as one of its sub-business fields (which includes: production houses, film-production and distribution facilities, recording studios). Thus, this particular business field is now opened to unrestricted investment.

Communications and Information Technology

The New Negative List increases the foreign-investment restrictions from 49% to 67% for the following businesses:

  1. Permanent telecommunications network providers;
  2. Mobile telecommunications network providers;
  3. Integrated telecommunications network providers;
  4. Telecommunications content services;
  5. Call centers;
  6. Internet service providers;
  7. Data communications services;
  8. Internet calls in the public interest; and
  9. Other multimedia services.


The New Negative List adds three new financial-sector business fields, specifically for investment financing companies, working-capital financing companies and multipurpose financing companies. These business fields are opened to foreign investment of up to 85%. Moreover, the New Negative List has removed  pension funds from the list, hence this business field is now entirely open to investment.

Should you need any further information, please do not hesitate to contact us at:

Sagita Ridjab Syah & Partners

5th floor | Menara Dea – Tower 1

Mega Kuningan Business Area Kav.E4.3

Jakarta 12950 | Indonesia

Phone : +62 21 576 1230

Fax       : +62 21 576 1231

Attn: Febby Sagita / ( / Triano Ridjab ( /

Murizah T. Abidin ( / Priyatna Yoopie (

Banking, Mining, Infrastructure & Telecommunication

•  Banking:
Bank Indonesia (BI), the countrys central bank, unveiled a package of new regulations last week, including the multiple license rule, which is set to come into force next year. One of the nine regulations will classify banks based on their core capital and is expected to encourage consolidation between small banks through mergers and acquisitions and ultimately strengthen the nations banking sector, analysts say. According BI Governor Darmin Nasution said in Jakarta, these regulations are to encourage sustainable and inclusive financial growth.

•  Mining:
Indonesias constitutional court partially upheld the latest challenge to the country’s mining laws on Thursday, in a verdict that sees regional governments gaining more control over the use of land for mining.

•  Infrastructure:
Indonesia’s biggest airport operator PT Angkasa Pura II will seek 20 trillion rupiah in commercial loans and bonds from next year to finance its $2.7 billion development of the country’s main airport, its chief executive said.

•  Telecommunication:
The Supreme Court rejected a ruling declaring Indonesias biggest telecommunication operator Telkomsel bankrupt overturning a controversial decision stemming from Rp 5.3 billion ($555,000) in unpaid debt.

Investment Law Update

•  Investment Law Update:
Recently, the Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM) has issued new regulation namely BKPM Head Regulation No.5 of 2013 (Peraturan Kepala BKPM No. 5 Tahun 2013 – BKPM 5/13) concerning Guidelines and Procedures for Licenses and Non-Licenses for Capital Investment. We have identified here some of major points which may have an impact on your business in Indonesia.

•  Capital Threshold:
BKPM 5/13 has regulated the minimum investment amounts for specific types of limited liability incorporated in Indonesia. The intention here is to provide clarity on the investment value when an investor comes to Indonesia. For domestic capital enterprise (Penanaman Modal Dalam Negeri – PMDN), BKPM requires the capital investment of more than IDR500,000,000 (five hundred million Rupiah). Meanwhile for foreign capital enterprise (Penanaman Modal Asing – PMA), BKPM requires the investor to abide by the capital threshold of greater than IDR10,000,000,000 (ten billion Rupiah) or as equivalent to the applicable US Dollars currency at the time of application. This amount however does not include the value of property (land and building). BKPM also requires the investor to participate in issued and paid up capital of no less than IDR2,500,000,000 (two billion five hundred million Rupiah) or the equivalent US Dollars. Further to the capital arrangements, the participation in the company’s capital for each of the shareholder shall be no less than IDR10,000,000 (ten million Rupiah) or equivalent in which the percentage of shares ownership is based on nominal value of shares. Nevertheless, the BKPM has yet to regulate equity to debt ratio vis-àvis, in which plays a big part in capital investment. This would later raise question of the possibility to have an enormous amount of debt to cover big investment. Consultation to BKPM is still needed from case to case basis so as to check on the equity to debt ratio. This may differ for each industry.

•  Procedure:
BKPM 5/13 also provides the latest procedures on the applications to BKPM. In the previous BKM regulation, registration is the first step in getting BKPM principle license. However BKPM 5/13 has removed this requirement and therefore cutting down the process. BKPM 5/13 requires PMDN to provide presentation beforehand, for better understanding of its business. Though it is not mandatory for PMA, sometimes PMA companies are requested to provide technical briefing to BKPM also.

•  Shareholding:
SHAREHOLDING BKPM 5/13 also provides some guidelines on change of shareholding. It is now clear that the subsidiary company(s) of a PMA company is required to apply for change of status to become PMA as well. In addition to the aforementioned, if the Indonesian subsidiary is in the closed line of business activity under Negative Investment List (Daftar Negatif Investasi – DNI), the subsidiary is required to divest its shares to Indonesian entity or any other PMDN based on DNI. LISTED COMPANY BKPM 5/13 also stipulates the provisions in relation to shareholding for listed company. BKPM 5/13 expands to include the definition of controlling shareholders in listed company. It is stipulated that, anyone who owns more than 50% of the total paid-up shares or any entity in which has the ability to determine the management or policy of a listed company whether direct or indirect, shall be considered as controlling shareholders. The regulation further defines the classification of the listed company based on its shareholding composition. Firstly, the listed company that one or the entire controlling shareholders are foreign entity, shall be considered as PMA. Secondly, such company is to be considered as PMDN in the event all of controlling shareholders are Indonesian. As such, any listed company that is classified as PMA, should apply for principle license. BKPM 5/13 further provides that the application must be accompanied by a copy of a letter submitted by the controlling shareholder to the Financial Service Authority (Otoritas Jasa Keuangan – OJK). Currently there is no implementing regulation on the requirement to report changes of shareholding for a public listed company to OJK. This issue need to be ironed out between OJK and BKPM by having an implementing regulation.

•  Restriction For Venture Capital Companies:
As for venture capital companies, BKPM 5/13 restricts any Indonesian venture capital companies to be shareholders in a large-scale PMDN or PMA. Existing shareholdings by venture companies must be divested within a period of ten (10) years.

•  Divestment:
BKPM 5/13 clearly stipulates that the existing divestment obligation of a PMA as contained in the investment approval/business license issued by BKPM would still be applicable and binding to the obligated party. Additionally, PMA entity of which divestment obligation has already been due date and still unable to find proper Indonesian shareholder, BKPM 5/13 may consider providing extension period of maximum two (2) years.

•  Representative:
Initially there were two authorities that are capable of issuing representative office namely Ministry of Trade (Kementerian Perindustrian – KemenPerin – MOT) and BKPM. Subsequent to the issuance of BKPM 5/13, BKPM is the only authority to issue license in relation to representative office. Previously, there was no period imposed on representative office which is registered with BKPM. However, with the issuance of BKPM 5/13, representative office is only allowed for a period of 3 (three) years, with the possibility of two times extension, each for 1 (one) year period. The main reason for introducing the timeframe is to encourage investors to set up its business in Indonesia after familiarizing with the Indonesian market. In relation to the existing representative office under the previous license, the BKPM 5/13 is silent on the obligation to reapply the said license to comply with BKPM 5/13. However, there is a huge possibility that if the representative office proposes changes and is required to make submission to BKPM, BKPM may enforces the representative office to comply with the recent regulation thus losing the availability of unlimited period of establishment from the previous license.

Requirements for Mine Mouth Coal Power Plant

It has recently come to our knowledge that the Ministry of Energy and Mineral Resources (MEMR) is moving towards imposing mining companies holding IUP to build mine mouth coal power plant.

The purpose behind such imposition appears to be two folds. Firstly, the government official has told us that this is to encourage domestic sale and therefore suppress coal exports. It has been seen that the country is losing its coal resources due to the exportation.

Secondly, this requirement is to meet the growing domestic power demand. With the Indonesia’s economy merging, the growth for demand of electricity increase at 7% p.a. to 9% p.a. for foreseeable future.

MEMR has indicated that they would facilitate the construction of mine mouth power plant and also grant incentives to mining companies for constructing the mine mouth power plant.

With the proposed intention, coal trading companies focusing on export of coal will need to adjust its business as it will reduce the amount of coal available for export. And the countries that are relying on coal from Indonesia will need to get their supply from other locations.

We are yet to sight any draft regulation in this connection. We will monitor and provide updates to our clients should MEMR provide opportunity for public consultation on the draft regulation.