Two prominent business associations, the Indonesian Chamber of Commerce and Industry (Kadin) and the Indonesian Employers Association (Apindo), have welcomed the governmentâs revisions to the 2010 negative investment list
wo prominent business associations, the Indonesian Chamber of Commerce and Industry (Kadin) and the Indonesian Employers Association (Apindo), have welcomed the government's revisions to the 2010 negative investment list.
The new negative investment list, which was issued on April 23 through a presidential regulation, gives more flexibility to foreign investors in several sectors, while limiting them in others.
The new list, which either totally or partially restricts foreign investment, was issued after a previous stakeholders' meeting, including government officials and businesspeople, on Dec. 24 last year, amid the government's efforts to reduce its current-account deficit, a major worry among foreign investors.
'I think what the list stipulates already takes into account the interests of the business sector,' Kadin chairman Suryo Bambang Sulisto told The Jakarta Post on Friday evening.
'Whether or not it satisfies all businesspeople depends on whether their positions will be threatened in competition following the issuance of the new list.'
He added that foreign ownership was also necessary in certain sectors where local players had neither the required knowledge nor technology to run their businesses, to ensure the transfer of such skills.
The Investment Coordinating Board (BKPM) reported last month that foreign direct investment (FDI) grew only 9.8 percent year-on-year (y-o-y) in the first quarter this year to hit Rp 72 trillion (US$6.2 billion), a far cry from the 25.4 percent growth Indonesia posted in the fourth quarter last year.
Echoing Suryo, Apindo deputy chairman Franky Sibarani said he also felt 'grateful', as 'there are relatively no changes in the list from what was discussed in the last meeting'.
Among the points stipulated in the new list is full ownership by foreign investors of power plants with more than 10 megawatt (MW) capacity during a concession period under a public-private partnership (PPP).
The 2010 list offered a maximum foreign ownership level of 95 percent.
The new list, however, limits foreign ownership to 49 percent in power plants with a capacity of between 1 and 10 MW, while the old list did not give a cap as long as foreign investors partnered with local ones.
'We have to admit that our 10,000 MW crash program failed in the past as realization progressed at a snail's pace. This affected [economic] growth and made doing business harder,' Suryo said.
'With [the greater flexibility for foreign ownership of power plants], we hope that we can expedite electricity procurement to meet our needs.'
Also under the new list, the government allows foreign investors in pharmaceutical firms to increase their ownership from 75 to 85 percent, and in advertising agencies from 49 to 51 percent.
It also puts a maximum foreign ownership cap of 33 percent in the trade services of distribution, warehousing and cold storage. The old list did not regulate foreign investment limits in these trade services.
The International Pharmaceutical Manufacturers Group, which represents foreign companies including Pfizer, Sanofi SA and Novartis, said the revisions would do little to attract further investment as they still required having Indonesian partners.
'The main issue is intellectual property,' Parulian Simanjuntak, the group's executive director, told Reuters. 'By having local shareholders, they have access to confidential information.'
However, Franky maintained that the foreign ownership cap increase in pharmaceutical firms was a positive thing.
He said the new Industry Law would guarantee the development of the downstream pharmaceutical industry, which imports 95 percent of its raw materials, since it now came under the auspices of the Industry Ministry, adding that before the issuance of the new law, pharmaceuticals came under the purview of the Health Ministry.
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