Latest Negative List of Investments In Indonesia

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By:

Team Hukumindo

Still in investment law edition, previously, the Hukumindo.com platform has discussed the subject of "Understanding 5 Steps Foreign Direct Investment In Indonesia", and on this occasion will discuss about 'Latest Negative List of Investments In Indonesia'. 

In the previous article, it was mentioned about the general description of the 5 steps of investing in Indonesia, and the first step is to establish a corporate legal entity and then register it. Legally, this step consists of two processes, the first is establishing a company legal entity and the second is the process of registering it. In this article, we will discuss the first process, which is related to how to establish a corporate legal entity. While the second process, will be discussed in the next article. 

Before establishing a company legal entity, investor should consider Negative List of Investments as one of the important requirements in establishing a foreign capital company in Indonesia. The regulation regarding the negative list of investments in Indonesia is based on Presidential Regulation Of The Republic Of Indonesia Number: 49 Year 2021 Concerning Amendment To Presidential Regulation Number: 10 Year 2021 Concerning Investment Business Sector. This Presidential Regulation refers to the Job Creation Act.

In this latest Presidential Regulation, in general, the changes from the list of investment business fields are as follows: 

1. Closed Business Fields, the following are business fields that are closed to foreign and domestic investment : 

• Narcotics;
• Any form of gambling and/or casino;
• (Convention on International Trade in Endangered Species of Wild Fauna and Flora) CITES-listed fishing;
• Utilization or collection of coral/coral;
• Chemical weapons manufacturing industry; and
• Chemical industry and the ozone layer depleting industry, (6 business fields, previously 20 business fields).
• The liquor industry containing alcohol such as wine and the beverage industry containing malt are also included in the business sector that is closed in nature.
• Manufacture of traditional medicinal products.
• Manufacture of raw materials for traditional medicines for humans.
• Manufacture of building goods from wood.
• Coffee processing industry that has obtained geographical indications.
• Rendang Industry.
• Ship Industry (phinisi, outrigger, and wooden boats with traditional designs).
• Non-furniture wood carving handicraft industry, wood carving, reliefs, masks, statues and puppets.
• Traditional cosmetic industry.
• Batik Industry (Written Batik, stamp, and combination).
• Industry of crackers, chips, dents, and the like.
• Art Gallery.
• Wooden building goods industry.

2. Open Business Fields, the following are business fields that are open to foreign and domestic investment: 

• Priority business fields (245 new business fields).
• Business fields allocated or partnerships with Cooperatives and MSMEs:
• Allocated for Cooperatives and SMEs (112 business fields, previously 103 business fields).
• Partnership with Cooperatives and MSMEs (51 business fields, previously 55 business fields).
• Restrictions on foreign capital ownership or with certain conditions (46 business fields, previously 350 business fields).
• Open to foreign as well as domestic investment (business fields that are not included in the letters a, b, and c above).

In general, the list of investment business fields as regulated in Presidential Regulation No. 10/2021 does not adopt drastic changes, only that there are several new provisions, including Priority Business Field. Priority business fields are business fields that meet the following criteria:

• National strategic program/project;
• Capital intensive;
• Labor intensive;
• High technology;
• Pioneer industry;
• Export orientation; and/or
• Orientation in research, development, and innovation activities.

Business activities that meet the above criteria (there are 245 business activities included in this criteria) are entitled to: 

• Fiscal incentives, in the form of tax and customs incentives. Tax incentives include: 1. income tax for investment in certain business fields and/or in certain areas (tax allowances); 2. reduction of corporate income tax (tax holiday); or 3. reduction of corporate income tax and net income reduction facility in the context of investment as well as reduction of gross income in the context of certain activities. Meanwhile, customs incentives are in the form of exemption from import duties on the import of machinery and goods and materials for construction or industrial development in the context of investment.
• Non-fiscal incentives, including ease of business licensing, provision of supporting infrastructure, guarantee of energy availability, guarantee of availability of raw materials, immigration, employment, and other facilities in accordance with the provisions of laws and regulations.
• Special Economic Zones, specifically foreign investment for technology-based startups in special economic zones, are excluded from the minimum investment value limit of IDR 10,000,000,000 (excluding land and building value).
• Investment Agreements between Countries, the provisions on restrictions on foreign capital ownership regulated in Presidential Regulation No. 10/2021 do not apply to foreign investors who have special rights based on investment agreements between Indonesia and the country of origin of the investors.

Another thing that is also important to know in this Presidential Regulation No. 10/2021 is the existence of important business exemptions, which include the following sectors: Technology: such as Media, and Telecommunications; Health such as hospitals, pharmaceutical product industry, pharmaceutical wholesalers and distributors of medical devices; Electric Power such as small-scale power plant of 1 MW, and construction and installation of electrical power installations for the installation of electricity utilization; Construction includes construction services for various types of buildings except those using simple and medium technology; Then there is the Infrastructure sector for the bottled water and refill drinking water industry; Then there is the agricultural sector, namely agriculture for staple foods: rice, corn, potatoes, and soybeans, and plantations: sugarcane, tobacco, coffee, cocoa, rubber, coconut, and oil palm plantations; Then the logistics sector in the form of transportation management services and airport activities; Then the Retail and Trade sector in the form of retail trade of cars and motorcycles and of course Supermarkets; Hospitality and Tourism Sector Property brokerage and Activities of travel agents and tour operators. In addition, although the above sectors  is 100% open to foreign investment, it is still subject to existing regulations.

*) For further information please contact:

Mahmud Kusuma Advocate

Law Office

Jakarta - Indonesia.

E-mail: mahmudkusuma22@gmail.com

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References:

1. http://hukumpenanamanmodal.com, "DAFTAR BIDANG USAHA PENANAMAN MODAL BARU BERDASARKAN PERPRES NO. 10/2021", Diakses pada tanggal 22 Agustus 2021, http://hukumpenanamanmodal.com/penanaman-modal-2/daftar-bidang-usaha-penanaman-modal-baru-berdasarkan-perpres-no-102021/ and https://smartlegal.id, "Hati-Hati! Ini Daftar Bidang Usaha Investasi Asing Yang Dilarang", Diakses pada tanggal 22 Agustus 2021, https://smartlegal.id/galeri-hukum/pma/2021/08/03/hati-hati-ini-daftar-bidang-usaha-investasi-asing-yang-dilarang/