Indonesia to relax FDI norms to boost economy

Jakarta, Jan 2 (IANS) Indonesia will reduce foreign direct investment (FDI) caps on four sectors, including finance, infrastructure and creative economy, in a bid to attract foreign funds as a means to combat slowing economic growth in Southeast Asia’s largest economy.

“Four fields of business have become more open to foreign investment,” Investment Coordinating Board (BKPM) head Mahendra Siregar said.
The four sectors are transportation, health, tourism and creative economy, and finance.
Mahendra said the revised 2010 government regulation on the “negative investment list” had provided more opportunities for foreign investors in Indonesia, Antara news agency reported.
The negative list covered sectors where FDI was either restricted or banned, due to their sensitive nature.
With a revision of the list, foreign investors will have more room for investing in Indonesia’s infrastructure sector within public-private partnership (PPP) schemes.
India is keen to step up investment in Indonesia, especially in infrastructure, food, automotive and manufacturing sectors.
Currently, Indian investment in Indonesia was mostly in the mining, textile and automotive sectors.
Last weeek, the government of President Susilo Bambang Yudhoyono increased FDI levels in airports, power plants, and toll roads.
In the financial sector, foreign ownership in the venture capital business has been increased to 85 percent from its previous 80 percent.
In the transportation sector, business activities are to foreign investment are providing and organizing land terminals, especially in the development of passenger terminals and public cargo terminals.
“The development of land transportation passenger terminals and public cargo terminals are now open for foreign investors with a share ownership of 49 percent maximum,” said Mahendra, adding a recommendation from the transportation minister would also be required.
Routine motor vehicle tests are also now open for foreign investors with a maximum share ownership of 49 percent and require a recommendation from the transportation minister.
In the health sector, foreign share ownership in the pharmaceutical industry has been expanded to a maximum of 85 percent from the current 75 percent and requires a recommendation from the health minister.
Mahendra explained that for the tourism and creative economy sector, the advertising businesses that used to require 100 percent domestic ownership now offered a maximum 51 percent share ownership for investors from ASEAN member countries.
The revised policy also covers sectors such as distribution, warehousing and cold storage where foreign investment was restricted.
“For distribution, warehousing and cold storage for Bali, Java and Sumatra, foreign ownership is allowed up to 33 percent, but cold storage for Kalimantan, Maluku, Nusa Tenggara, Papua and Sulawesi is open for foreign investors with a maximum share ownership of 67 percent,” said Mahendra.
Earlier this year, Indonesia witnessed huge foreign fund outflows, as investors concerned at the emerging economy’s huge current account deficit and the domestic currency’s steep depreciation, fled the country.
Fearing further loss in foreign funds in the wake of the US Federal Reserve’s decision to wind down its monetary stimulus, and due to the political uncertainty ahead of the upcoming general elections, the government has been trying to prop up investor sentiment.