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Major steps liberalize economy
President Joko âJokowiâ Widodo has flung open sectors including roads, the film industry, e-commerce marketplaces and restaurants to foreign investors in a major liberalization effort aiming to attract investment
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President Joko 'Jokowi' Widodo has flung open sectors including roads, the film industry, e-commerce marketplaces and restaurants to foreign investors in a major liberalization effort aiming to attract investment.
The government announced on Thursday that it would revise the nation's negative investment list (DNI) ' which stipulates those sectors banned or restricted from foreign investment ' to open 35 previously closed business sectors and allow greater foreign ownership in dozens more.
Foreign investors will be allowed full ownership in sectors such as cold storage, crumb rubber, sports centers, restaurants, raw pharmaceutical materials, toll roads and the film industry. Meanwhile, greater foreign ownership will be applicable for sectors including distribution, warehouses, private museums and e-commerce marketplaces valued above Rp 100 billion.
'Increasing investment is absolutely vital to boosting economic growth,' read a statement from the office of the coordinating economic minister, 'to support Indonesia's road to becoming a production hub and logistics center, and positioning itself to benefit from greater market access through the ASEAN Economic Community and global supply chain.'
Investment accounts for about a third of Southeast Asia's largest economy and is crucial to achieving Jokowi's ambitious annual economic growth target of 7 percent by the end of his five-year tenure, from 4.8 percent in 2015, the slowest since the 2009 global crisis.
'This will also drive local companies to improve their competitiveness,' Cabinet Secretary Pramono Anung told a press briefing at the Presidential Palace. The DNI revision is part of a government economic stimulus package, the 10th in a series that began in September last year, aiming to revive sluggish growth.
The revised list also included protection for micro businesses and small and medium-sized businesses (SMEs), said Pramono, calling it a 'modernization' of the Indonesian economy rather than a 'liberalization'.
Investment Coordinating Board (BKPM) head Franky Sibarani stopped short of estimating how much investment was expected to be netted thanks to the revision, but said he hoped investors would be attracted, helping to attain a target of Rp 3.5 quadrillion in investment over the next five years.
The new DNI also closes coral reef harvesting activities for investment, adding to other prohibited businesses such as casinos and gambling, cannabis cultivation and harmful chemicals.
'The revision of the DNI list has been discussed since the fourth quarter of last year and has been open for input from the public, businesspeople and other stakeholders,' Coordinating Economic Minister Darmin Nasution said.
Bank Maybank Indonesia chief economist Juniman said that the revised DNI was in line with the government's development priorities and its aim to boost the country's economic growth by attracting more investment while still protecting micro businesses and SMEs.
'The idea behind this revision is to improve investment and protect the growth of SMEs,' he said, adding that these goals were also the soul of the stimulus series as a whole.
Expressing a similar view, Samuel Sekuritas economist Lana Soelistianingsih lauded the government's move to allow foreign investment to help develop raw materials, such as crumb rubber and raw ingredients for medicine.
'In the long run, it will positively affect our gross domestic product, as it will reduce imports in raw materials,' she said, citing as an example that the country still imported around 90 percent of raw ingredients for medicine.
Institute for Development of Economics and Finance (Indef) executive director Enny Sri Hartati urged the government to issue derivative regulations to ensure the rights of domestic consumers were not left by the wayside.
She expressed particular concern that the liberalization of businesses grouped under the tourist sector ' restaurants, bars, cafes, recreation, sport centers, etc. ' would marginalize domestic tourism operators.
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