The New Positive List of Investment

Indonesia issued Presidential Regulation 10 of 2021 (replaces Presidential Decree No.36/2010 (Indonesia’s negative investment list), which liberalizes many business sectors for foreign investment.

The New Positive List of Investment (a Concise Guide)

Following the new investment regulatory framework introduced by Law No. 11 of 2020 on Job Creation (known as the “Omnibus Law”), the President of the Republic of Indonesia issued Presidential Regulation No. 10 of 2021 on Investment Lines of Businesses (“New Positive List”). The New Positive List was enacted on 2 February 2021 and take effect on 4 March 2021.

In line with the objectives of the Omnibus Law to promote investment and create job opportunities through economic growth, the New Positive List marks a significant opening up of many business sectors in Indonesia, including by lifting the maximum foreign ownership restriction in many business sectors which were previously regulated under Presidential Regulation No. 44 of 2016 (known as the “Negative List”). Key sectors where previous foreign ownership restrictions have now been lifted include:

Positive List

Energy

including power generation above 1MW, and construction and other support services in the oil & gas and power sectors

Positive List

Construction Services

Positive List

Distribution

including drugs wholesale and certain retail trading

Positive List

Transportation

notably including ports and airports

Positive List

Telecommunications

including fixed and mobile network providers, internet service providers and telecommunications tower providers

1. Lines of Business Conditionally Open to Foreign Investment :

Generally 100% open, unless subject to a specific restriction

The general principle is that, unless it is subject to one of the specific types of limitation summarised below, a line of business is 100% open to foreign investment.
That said, it is important to note that the New Positive List does not seek to regulate foreign ownership limitations in banking and financial services sectors. These will be regulated in the relevant banking and financial services regulations, therefore the current foreign ownership limitations in these sectors are unaffected by this New Positive List.

Lines of business conditionally open to foreign investment

This category of foreign investment limitation contemplates the following types of foreign ownership restriction:

  • lines of business that are reserved entirely for domestic investors;
  • lines of business that are subject to foreign ownership limitations; and
  • lines of business that are subject to special licensing requirements.

The previous Negative List had a similar concept of lines of business either closed, or conditionally open to foreign investment. Accordingly, the most notable change brought about by the New Positive List is the extensive reduction in the number of lines of business subject to such a restriction, thus bringing about the greatest liberalisation in foreign ownership limitations in Indonesia since the concept of a “negative list” on investment was introduced in the 1980s. The lines of businesses within this category are listed in Exhibit III of the New Positive List, and cover 46 lines of businesses, reduced from 350 under the previous Negative List.

Conditionally Open Lines of Business Under the New Positive List (with Interactive Table) :

Exceptions

Even where foreign ownership limitations have been retained under the New Positive List, the foreign ownership limitation does not apply in the following specific circumstances:

  • businesses located in a Special Economic Zone;
  • indirect/portfolio investments made through the domestic capital markets – this exception for foreign investment through listed companies is retained from the previous Negative List;
  • grandfathering – as with the previous Negative List, if any line of business is treated less favourably in the New Positive List, then level of foreign investment already approved prior to the enactment of the New Positive List would still be grandfathered if stated in the relevant Business Licence. In the case of M&A, the applicable foreign investment limitation will be of that stipulated under the Business Licence of the relevant surviving entity or target company (as applicable); and
  • investments subject to more favourable treatment in a treaty between Indonesia and the investor’s country of origin.

2. Reservations for cooperatives and micro, small and medium scale businesses (“MSME”) :

It is important to note that, for certain of the lines of business that are generally liberalised from a foreign investment limitation perspective under the New Positive List, there remain certain specific reservations within those lines of business for activities of a particular scale or complexity to be undertaken by, or in partnership with, cooperatives and MSME. These reservations do, in effect, impose foreign ownership restrictions on such activities, as foreign investment cannot, by definition, be undertaken in Indonesia in the form of cooperatives or MSME.

The types of lines of business subject to such restrictions can be summarised as follows:

Businesses allocated to cooperatives and MSME (and therefore not open to foreign investment), being:

  • Businesses that do not require technology or which use simple technology;
  • Labour intensive business having a particular process and cultural heritage; and/or
  • Businesses with capital not exceeding IDR10 billion, excluding land and buildings.

Businesses allocated to cooperatives and MSME (and therefore not open to foreign investment), being:

  • Businesses that do not require technology or which use simple technology;
  • Labour intensive business having a particular process and cultural heritage; and/or
  • Businesses with capital not exceeding IDR10 billion, excluding land and buildings.
The specific lines of businesses that are subject to such restrictions are listed below interactive table covering 89 types of businesses.

Business Fields Reserved for Cooperatives and MSMEs (with Interactive Table) :

3. Prioritised Sectors for Incentives :

In addition to the very significant foreign ownership liberalisation introduced through the New Positive List, unlike the Negative List (and the older lists), the New Positive List also identifies a list of prioritised sectors for investment that are entitled to receive fiscal and non-fiscal incentives (tax holidays, tax allowances, investment allowances, customs and excise allowances, ease of licensing, provision of supporting infrastructure, etc.) in accordance with the prevailing laws and regulations.

The prioritised sectors cover national strategic projects, labour intensive businesses, capital intensive businesses, hi-tech businesses, pioneer industries, export-oriented businesses and research and innovation- oriented businesses. These prioritised lines of businesses are summarized in below table of the New Positive List covering 245 types of businesses.

Priority Sectors – 245 Business Lines Open for Foreign Investment (with Interactive Table) :

4. Comparison Between the Negative List and the New Positive List :

Set out below are comparison between the now revoked Negative List and the New Positive List in respect of some business sectors.

Out of 20 closed lines of businesses under the Negative List, the Omnibus Law retains six lines of businesses as the ones closed for investment, being: narcotics cultivation and industry, fishing of prohibited species, coral extraction, gambling and casino business, chemical weapons and manufacturing of industrial chemical or materials hazardous to ozone layer.

Some closed lines of business under the Negative List are now either open or subject to certain conditions under the New Positive List. Some examples are set out below.

Line of BusinessNegative ListNew Positive List
Wine industryClosedNew investment can only be conducted in certain provinces, unless otherwise stipulated by the Head of Investment Coordinating Board based on the relevant governor’s proposal – no foreign ownership restriction
Alcoholic beverage industryClosedNew investment can only be conducted in certain
provinces, unless otherwise stipulated by the Head of Investment Coordinating Board based on the relevant governor’s proposal – no foreign ownership restriction
Terminal for land transportation passenger ClosedOpen (without condition)
Aviation navigation servicesClosedOpen (without condition)
Radio frequency spectrum and satellite
orbit monitoring station
ClosedOpen (without condition)
Line of BusinessNegative ListNew Positive List
Palm oil – seed plantation and
plantation with a total area less than
25 hectare
Allocated to MSME Open (without condition) and listed as prioritised
sector
(Various types of) plantation (less than
25 hectare)
Allocated to MSME Pepper and sugar cane plantation are listed as prioritised sectors – no specific conditions for other types of plantation regardless of its width
Construction implementation services using simple/medium technology and/
or with low/medium risk and/or having work value up to IDR50 billion
Allocated to MSME More detailed types of construction services using simple/medium technology are generally classified as businesses allocated to MSME, but there are no criteria based on the work value
Construction consultancy business
using simple/medium technology and/or with low/medium risk and/or having work value up to IDR10 billion
Allocated to MSME 
Retail trading through mail and internet orderSubject to partnership requirement with MSME or cooperativesOpen (without condition)
Travel agentAllocated to MSME Open (without condition)
Radio and television community broadcasting agencyAllocated to MSME 100% domestic investment upon establishment. Maximum 20% foreign ownership during business expansion
  • Plantation and plantation-based industry
    Line of BusinessNegative ListNew Positive List
    Plantation with a total area of at least 25 hectare with/without processing unit (in general)Maximum 95% foreign ownership (with the obligation to establish 20% plasma plantation)Open (without condition) Pepper and sugar cane plantation are listed as prioritised sectors
    Palm oil – seed plantation with a total
    area of at least 25 hectare
    Maximum 95% foreign ownership (with the requirement that at least 20% of the raw material shall originate from own plantation)Open (without condition) and listed as prioritised sector
  • Energy and mineral resources and energy related services
    Line of BusinessNegative ListNew Positive List
    Oil and gas construction (platform)Maximum 75% foreign ownershipOpen (without condition)
    Oil and gas construction (onshore upstream oil and gas production installation)100% domestic investmentOpen (without condition)
    Oil and gas construction (onshore distribution pipeline)100% domestic investmentOpen (without condition)
    Oil and gas construction (offshore distribution pipeline)Maximum 49% foreign ownership Open (without condition)
    Onshore oil and gas drilling service100% domestic investmentOpen (without condition)
    Offshore oil and gas drilling serviceMaximum 75% foreign ownershipOpen (without condition)
    Geothermal drilling serviceMaximum 95% foreign ownershipOpen (without condition) and listed as prioritised sector
    Oil and gas well operation and
    maintenance service
    100% domestic investmentOpen (without condition)
    Oil and gas design and engineering service100% domestic investmentOpen (without condition)
    Geothermal operation and maintenance serviceMaximum 90% foreign ownershipOpen (without condition)
    Electricity generation below 1 MW100% domestic investmentAllocated to MSME/cooperatives
    Small scale electricity generation (1-10 MW)Maximum 49% foreign ownershipOpen (without condition)
    Geothermal electricity generation 10 MW or belowMaximum 67% foreign ownershipOpen (without condition)
    Electricity generation above 10 MWMaximum 95% foreign ownership (maximum 100% foreign ownership in a PPP scheme during concession period)Open (without condition)
    Electricity transmission Maximum 95% foreign ownership
    (maximum 100% foreign ownership in a PPP scheme during concession period)
    Open (without condition)
    Electricity distributionMaximum 95% foreign ownership
    (maximum 100% foreign ownership in a PPP scheme during concession period)
    Open (without condition)
    Construction and installation of electricity installation on electricity supply installationMaximum 95% foreign ownershipConstruction and installation of
    electricity installation on low and
    medium voltage electricity supply installation is allocated to MSME/cooperatives
    Construction and installation of electricity installation on extra high and high voltage electricity utilisation installationMaximum 49% foreign ownership Open (without condition)
    Construction and installation of electricity installation on medium and low voltage electricity utilisation installation100% domestic investmentOpen (without condition)
    Electricity installation operation and maintenanceMaximum 95% foreign ownershipOpen (without condition)
  • Construction and public works
    Line of BusinessNegative ListNew Positive List
    Construction implementation service using high technology and/or having high risk and/or with a work value of more than IDR50 billionMaximum 67% foreign ownership (maximum 70% for ASEAN investors)Open (without condition)
    Construction consultancy service using
    high technology and/or having high risk and/or with a work value of more than IDR10 billion
    Maximum 67% foreign ownership (maximum 70% for ASEAN investors)Open (without condition)
    Drinking water businessMaximum 95% foreign ownershipOpen (without condition)
  • Trading
    Line of BusinessNegative ListNew Positive List
    Supermarket with selling area of less than 1,200 sqm100% domestic investmentOpen (without condition) (only non-supermarket, nondepartment store and minimarket retail trading are allocated to MSME)
    Minimarket with selling area of less than 400 sqm, including convenience store and community store100% domestic investmentAllocated to MSME/cooperatives
    Department store with selling area of 400 – 2,000 sqmMaximum 67% foreign ownership,
    with special licence from the
    Minister of Trade (must be located in
    a shopping mall/not standalone and can only add outlet based on pay performance)
    Open (without condition)
    Distributor not affiliated to productionMaximum 67% foreign ownershipOpen (without condition)
    WarehouseMaximum 67% foreign ownershipOpen (without condition)
  • Tourism
    Line of BusinessNegative ListNew Positive List
    Two stars hotelMaximum 67% foreign ownershipOpen (without condition)
    Five and four-stars hotel are open (without condition) and listed as prioritised sector
    One-star hotelMaximum 67% foreign ownershipAllocated to MSME/cooperatives
    Non-star hotelMaximum 67% foreign ownershipAllocated to MSME/cooperatives
  • Transportation and transportation-related services
    Line of BusinessNegative ListNew Positive List
    Land transportation for goods and passengers (in general)Maximum 49% foreign ownershipOpen (without condition)
    Terminal supporting servicesMaximum 67% foreign ownershipOpen (without condition)
    Port Maximum 49% foreign ownership
    Special Licence from the Ministry of Transportation in respect of minimum capital requirement
    Open (without condition)
    Airport servicesMaximum 49% foreign ownershipOpen (without condition)
    Air transportation supporting servicesMaximum 67% foreign ownershipOpen (without condition)
    Airport supporting servicesMaximum 67% foreign ownershipOpen (without condition)
    Maritime cargo handling servicesMaximum 67% foreign ownership (maximum 70% for ASEAN investors)Open (without condition)
    Cargo handling services in general are listed as prioritised sector
    Non-commercial air transportation Maximum 49% foreign ownership and single majorityMaximum 49% foreign ownership and single majority – applicable to all types of air transportation
  • Telecommunications, media and technologies
    Line of BusinessNegative ListNew Positive List
    Fixed telecommunication networkMaximum 67% foreign ownershipOpen (without condition)
    Mobile telecommunication network Maximum 67% foreign ownershipOpen (without condition)
    Telecommunication network integrated to
    telecommunication services
    Maximum 67% foreign ownershipOpen (without condition)
    Telecommunication content servicesMaximum 67% foreign ownershipOpen (without condition)
    Call centre and telephony added value servicesMaximum 67% foreign ownershipOpen (without condition)
    Internet service providerMaximum 67% foreign ownershipOpen (without condition)
    Data communication system servicesMaximum 67% foreign ownershipOpen (without condition)
    Telephony internet services for publicMaximum 67% foreign ownershipOpen (without condition)
    Internet interconnection services (NAP) and other multimedia servicesMaximum 67% foreign ownershipOpen (without condition)
    Telecommunication tower provider, operation and maintenance services and construction services100% domestic investmentOpen (without condition), except for telecommunication central construction conducted by construction company using simple/medium technology, which is allocated to MSME/cooperatives
    Newspaper, magazine and bulletin publishing (press)100% domestic investment100% domestic investment upon
    establishment and maximum 49% foreign ownership (through capital market) for business expansion
    Operation of e-commerce/OTT platforms with investment value of less than IDR100 billionMaximum 49% foreign ownershipOperation of all types of e-commerce/OTT platforms are open (without condition) – no investment value criteria
  • Pharmaceutical and Health
    Line of BusinessNegative ListNew Positive List
    Pharmaceutical industryMaximum 85% foreign ownershipOpen (without condition)
    Certain types of pharmaceutical industries are also listed as prioritised sectors
    HospitalMaximum 67% foreign ownership (maximum 70% for ASEAN investors)Open (without condition)
    Primary health clinics and private maternity clinics, clinics general medical, general healthcare clinics, residential health services and basichealthcare service are allocated to MSME/cooperatives

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