Indonesia Unveils “Big Bang” For Foreign Investment

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1. BRIEFING INDONESIA UNVEILS “BIG BANG” FOR FOREIGN INVESTMENT MAY 2016 ● 35 SECTORS TO BE REMOVED FROM THE NEGATIVE LIST – ALLOWING FOREIGN INVESTMENT ● RESTRICTIONS ON FOREIGN INVESTMENT TO BE RELAXED IN SOME OTHER SECTORS ● NEW NEGATIVE LIST EXPECTED TO BE PUBLISHED IN THE SECOND QUARTER OF 2016 Proposed revisions to the Indonesia Negative List In February 2016, the Indonesian government announced its 10th economic policy package, with one of the measures being to generate increased foreign investment into Indonesia. “DESCRIBED BY PRESIDENT JOKO WIDODO AS THE “BIG-BANG” LIBERALISATION OF INDONESIA’S ECONOMY, THESE MEASURES WILL RESULT IN SUBSTANTIAL REVISIONS TO THE NEGATIVE LIST...” Described by President Joko Widodo as the “big-bang” liberalisation of Indonesia’s economy, these measures will result in substantial revisions to the Negative List (also known as Daftar Negatif Investasi), which is the presidential regulation specifying business activities and sectors which are either entirely closed or conditionally open to foreign investment. The last round of revisions to the Negative List happened in 2014. This latest economic initiative firstly sees the removal of 35 sectors from the Negative List. Of these 35 sectors, some are currently completely closed to foreign investment whereas others are partially closed. The effect of taking these sectors off the Negative List is that they become fully open to foreign investment i.e. 100% foreign ownership is permitted. Major sectors from this group include toll roads, pharmaceutical raw materials, crump rubber and tourism. Secondly, certain sectors which are already open to foreign investment will be relaxed i.e. greater foreign ownership allowed. These include integrated telecommunication services, distribution and warehousing.
2. 2 Watson Farley & Williams Asia Practice Lastly, land transport, electricity installations and healthcare facilities, all of which are at present completely closed to foreign investment, are set to be opened up. While the Indonesian government has not indicated when the revised Negative List will be released, it is widely expected to be published sometime in the second quarter of 2016. Although the proposed revisions that were announced should not be taken as definitive, the revised Negative List should largely reflect these proposals. Going forward Until the revised Negative List is published, the existing Negative List still applies. As for foreign investments which are already approved by the Indonesian Investment Coordinating Board (BKPM) or will be approved prior to the release of the revised Negative List, these will not be adversely affected. “THE UPCOMING NEGATIVE LIST REVISIONS PROMISE TO LIBERALISE THE FOREIGN INVESTMENT CLIMATE AND LANDSCAPE IN INDONESIA.” The upcoming Negative List revisions promise to liberalise the foreign investment climate and landscape in Indonesia. Ahead of such changes, investors new to Indonesia or who have existing investments in Indonesia should consider: 1. identifying previously closed-sectors to enter into; 2. possible restructuring of existing shareholding in investments made in sectors which will be liberalised under the revised Negative List; and 3. potentially buying out minority shareholders in investments made in sectors which will be fully open to foreign investment, in order to assume full control. As with any new regulatory environment, the devil is in the detail and careful structural planning of foreign investment models will be required and implementation of the regulations will be key. Our team of lawyers has acted across Indonesia, working closely with a network of local practitioners on investment, tax and related matters. Armed with a keen understanding of the issues faced by foreign investors in Indonesia and the ability to find solutions, we help our clients to structure, negotiate and document their transactions and investments in Indonesia. FOR MORE INFORMATION Should you like to discuss any of the matters raised in this Briefing, please speak with a member of our team below or your regular contact at Watson Farley & Williams. AARON KOK Partner — Asia Practice, Singapore +65 6551 9193 akok@wfw.com IVAN CHIA Partner, Singapore +65 6551 9181 ichia@wfw.com Publication code number: 58017509v1© Watson Farley & Williams 2016 Watson Farley & Williams Asia Practice LLP is a limited liability partnership registered in Singapore with unique identity number T11LL1829G. For information about how Watson Farley & Williams Asia Practice LLP is authorised and regulated see the legal notices section on our website www.wfw.com. Any reference to a ʺpartnerʺ means a member of Watson Farley & Williams LLP or Asia Practice LLP, or a member or partner in an affiliated undertaking, or an employee or consultant with equivalent standing and qualification. This brochure is produced by Watson Farley & Williams Asia Practice. It provides a summary of the legal issues, but is not intended to give specific legal advice. The situation described may not apply to your circumstances. If you require advice or have question or comments on its subject, please speak to your usual contact at Watson Farley & Williams Asia Practice. This publication constitutes attorney advertising. wfw.com