Legal Alert – Indonesia’s New Negative Investment List

By Dyah Soewito, Esther J. Panggabean, Bezaliel B. Erlan and Darrell R. Johnson

Presidential Regulation No. 44 of 2016 regarding the List of Business Fields That Are Closed
and Business Fields That Are Conditionally Open for Investment (May 18, 2016) (the “2016
Negative Investment List” or the “2016 DNI”) replaces the 2014 Negative Investment List or
“2014 DNI,” and was made public on May 24, 2016. The 2016 Negative Investment List
refers to business lines and code numbers set forth in the Indonesian Standard Industrial
Classification of 2015 (the “KBLI”).

The 2016 Negative Investment List liberalizes some areas of foreign investment in
Indonesia, including foreign investment from ASEAN countries. However, it is also true that
the 2016 DNI does not contain the dramatic changes that had been anticipated by some
members of the foreign investment community.

In this Legal Alert, we provide an overview of the 2016 Negative Investment List and a
comparison of some of its provisions against the 2014 DNI. We also discuss some of the
policy decisions of the Indonesian Capital Investment Coordinating Board (“BKPM”) under
the prior Negative Investment List that may still be applied by the BKPM under the 2016 DNI.

I. Fundamental Principle of the DNI: Pursuant to Article 3 and Article 1(2) of the 2016
Negative Investment List, business lines that are not listed in the attachments to the 2016
DNI are deemed 100 percent open for foreign investment. There is no change in this basic
concept.

The 2016 Investment Negative List sets out that if a KBLI code number includes more than
one business line, then a capital investment limitation stated in the 2016 Negative
Investment List is applicable only to the business line that is expressly mentioned. For
example, KBLI Code No. 70209 covers “other management consultancy businesses.” The
2016 DNI specifically refers to this KBLI code number and horticulture development

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consulting, which is limited to a maximum 30 percent foreign investment. That foreign capital
investment limitation applies only to horticulture development consulting and not to other
types of consulting businesses.

II. Grandfather Provisions

A. Basic Concept – Prior Investments Are Protected Against Future

Changes: Similar to the 2014 Negative Investment List, the 2016 DNI provides grandfather
protection for businesses whose capital investments were approved prior to the enactment
of the 2016 Negative Investment List on May 18, 2016. The 2016 DNI is silent on what is
meant by an approved capital investment. Thus, if an application has been filed and received
a principle approval but no permanent license has been issued, which DNI will apply? The
BKPM’s approach to this issue in the past was to apply a prior DNI to any application for
which a principle approval had been given, which will also then be applicable to the later
application for a permanent business license. If no principle approval had been issued,
however, then the new DNI would be applied to a pending application. However, this
approach does not necessarily mean that an investor that received a principle approval
under the 2014 DNI cannot apply for more liberal treatment under the 2016 DNI. These and
other issues are not explicitly addressed in the 2016 DNI and a different policy could be
adopted by the BKPM.

B. Unwritten BKPM Policies on Grandfather Protection: There are also

other situations governed by the unwritten policies of the BKPM, in which grandfather
protection does not apply or conditionally applies. The situations below are based on our
experience with the 2014 DNI and its predecessors. It is likely but not certain that the BKPM
will continue such policies under the 2016 Negative Investment List.

1. Business Expansion by Adding New KBLI Code Number: If

investors wish to add a new investment activity (i.e., one covered by a new KLBI code
number) to an existing company, there are two consequences. First, the investors must
increase their investment level by a minimum investment of Rp 10 billion for each new KBLI
code number. 1 Second, the maximum level of foreign investment could be affected. For

1
With a three to one debt equity ratio, the equity portion of the investment can be Rp 2.5 billion.

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example, under the 2016 Negative Investment List, the distribution business is open for
foreign investment up to 67 percent. If PT X obtained a business license in 2008 for a
distribution business with an approved foreign investment of 90 percent, then its approved
foreign capital investment is protected under the grandfather clause. PT X will not be
required to adjust its capital structure in accordance with the new DNI. However, if PT X

were to expand its business by adding another business line, e.g., electronic trading
transaction with an investment value less than Rp 100 billion, which has a maximum foreign
investment level of 49 percent, then PT X would be required to reduce its foreign investment
level to no more than 49 percent.

As another example, under the 2016 DNI, the foreign investment level is a maximum of 33
percent for the production of class A health equipment. If PT Z obtained a business license
in early 2000 with an approved foreign investment of 90 percent, it will not be required to
lower its foreign capital investment because it is grandfathered. However, if PT Z plans to
also engage in the distribution business, which is open for foreign investment up to 67
percent, the BKPM will require PT Z to decrease its foreign capital investment to 67 percent
to comply with the 2016 Negative Investment List.

2. Product Diversification: The addition of a new KBLI code number

does not always trigger the termination of grandfather protection. The BKPM is of the view
that an additional KBLI code number within the same general business field may be
permitted and will not require a foreign investor to reduce its capital to a lower level required
by the 2016 DNI. This may occur in the case of product diversification. To illustrate, PT Z is a
company engaging in the business of perfume distribution, which is classified under KBLI
Code No. 46494. PT Z obtained its business license from the BKPM in 2000 when
distribution companies were permitted to have 100 percent foreign capital investment. PT Z
plans to expand its distribution business by adding liquid shower soap, which is classified
under the same five-digit KBLI code number as perfume distribution. As one would expect,
the BKPM will not require PT Z to reduce its foreign capital investment to 67 percent.

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Product diversification without a change in the foreign investment level may also be
achieved by adding a new KBLI code number. For example, PT A is a company engaging in
distribution of batik cloth and falls under KBLI Code No. 46411. PT A obtained its business
license in 2004 and was permitted to have foreign capital investment of 90 percent. To
develop its business, PT A now plans to also distribute shoes and sandals for children.
Distribution of clothing and footwear is classified respectively under KBLI Code No. 46411
and 46413. Since both KBLI code numbers are classified under the business group of the
wholesale business of textiles, clothes and footwear and share common KBLI code numbers
for the first three digits, the BKPM may not require PT A to comply with the current DNI

limitation on foreign capital investment in distribution of 67 percent, since these code

numbers are related and involve the same general business lines.

Product diversification raises a question about how related KBLI code numbers must be to
avoid a reduction in foreign investment. For example, if a company distributes footwear, can
it also distribute computer chips? The 2016 DNI does not address this issue and there is no
absolute standard. The BKPM may have a different treatment for each product and business
line. However, the greater the disparity in the products, and thus the KBLI numbers, the
more likely the BKPM will apply the restrictions in the 2016 DNI.

3. Business Expansion by Increasing Production Capacity: In this

situation, an existing company wishes to expand its production capacity. It is not adding a
new line of business. While prior approval from the BKPM is required for an existing
company to increase its production capacity beyond 30 percent, such a production capacity
increase is unaffected by the DNI and no adjustment in foreign equity level is required.

For example, PT Y is a company engaging in the geothermal power plant business with a
capacity of less than 10MW and has an approved foreign investment level of 90 percent.
Under the 2016 DNI, such a geothermal power plant would only be approved if the foreign
capital investment level was no more than 49 percent. PT Y would like to expand its
business by increasing its production capacity by more than 30 percent. BKPM approval is
required but PT Y will not be required to reduce its foreign capital investment to 49 percent.

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 4. Total Change of Business: Where an existing company intends to
change its business line entirely, then it will be required to comply with the 2016 Negative
Investment List. For example, if PT X obtained its business license in 2008 for management
consultancy with an approved foreign investment of 100 percent and now plans to engage
only in the inland freight transportation business, it must comply with the 2016 Negative
Investment List, which limits foreign capital investment in the new business line to a
maximum of 49 percent.

5. Voluntary Decrease of Foreign Capital Investment: A foreign

investor may reduce its capital investment in an Indonesian company by selling shares to a
domestic investor. In that case, it cannot thereafter increase its capital investment, whether

the increase is to the original approved level before the enactment of the 2016 Negative
Investment List or to a lower level allowed by the 2016 DNI if that level is higher than the
foreign investor’s current investment level.

For example, PT X holds a business license for the construction and installation of high-
voltage electrical utilization with an approved foreign investment of 90 percent. ABC Pte.
Ltd., a Singaporean legal entity, owns 90 percent of the shares. The 2016 Negative
Investment List sets forth a new maximum foreign capital limitation of 49 percent for the
construction and installation of high-voltage electrical utilization business. If ABC Pte. Ltd.
transfers some of its shares to an Indonesian shareholder, so that it holds less than 90
percent, it cannot later increase its foreign capital investment to its previously approved level
or any other level greater than its then current level. However, we believe if ABC Pte. Ltd.
reduces its capital investment in PT X by transferring its shares to a foreign entity or
individual or to another Indonesian foreign capital investment company or a “PMA”
company 2, so that PT X’s total foreign shareholding composition is still 90 percent, ABC Pte.
Ltd. can thereafter reacquire shares from the foreign transferees up to its original 90 percent.
However, BKPM policy on this latter point is not clear.
2
Article 1(3) of Law No. 25 of 2007 Regarding Capital Investment (April 27, 2007) defines foreign capital
investment to include the subsidiaries of foreign capital investment companies. Thus, any Indonesian company
owned in part or entirely by a PMA company is itself a PMA company and must register as such and is treated as
a foreign company. This has long been consistent with BKPM regulations and policy.

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We emphasize that most of the above rules are unwritten and have been developed
informally by the BKPM to address specific issues that have arisen over time. There is no
assurance that the BKPM will continue such unwritten policies or change them. We have
discussed these matters with BKPM officials. However, due to the fact the 2016 DNI was
recently issued, the BKPM has yet to determine its policies. We understand the BKPM will
be meeting internally over the next several weeks to determine these and other policies.

III. Policies Established by the 2016 DNI

A. Expansion to a New Area: Article 7(3) allows a PMA company located in

one area to expand to another area without establishing a new business entity, provided it
continues to comply with the Government’s spatial layout and environmental requirements.
However, there was no legal requirement to establish a new company if the investors
wanted to create an additional location for their existing business. BKPM approval is
required to add an additional location and this does not appear to be changed by Article 7(3).

B. Investments Conducted Through the Capital Market or Indirectly: Article

8 of the 2016 DNI provides that business lines that are open with requirements under Article
2(2)(b) and Attachment III (i.e., among others, foreign investment limits) are considered open
without such conditions if an investment is made indirectly or by portfolio trading on the
Indonesian stock exchange. We believe the BKPM in effect treats such shares traded as
domestic capital.

Article 8 presents some interesting issues that have not yet been resolved. Clearly, portfolio
trading is freely permitted by Article 8, but it is not clear what is meant by investments that
are “carried out indirectly.” The use of the word “or” suggests that indirect investments are to
be distinguished from portfolio investments. However, it is possible that indirectly was meant
to refer to portfolio trading as indirect, which the language “or by portfolio trading” was
intended to clarify, and that the investment is considered indirect in the sense BKPM
approval is not required. Future regulations or policy directives of the BKPM may make this
clearer.

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Article 8 is also unclear in another respect given the BKPM’s prior policies. When PMA
companies have gone public in the past and their articles of association still refer to the
original foreign investor and the PMA companies continue to hold a BKPM approval, it has
been the BKPM’s unwritten policy that such companies are still required to comply with all
reporting, approval and licensing obligations under BKPM regulations. Thus, even though
the PMA public company’s shares are treated as domestic capital, this is not true for the
original foreign investor. Its shares continue to be subject to BKPM regulatory jurisdiction as
foreign capital, even though they are also traded publicly and even though Article 8 clearly
provides that the business line of such a public company is treated as an “Open Business
Field,” meaning there are no restrictions to foreign investment. If that is the case, then why
does the BKPM continue to assert regulatory jurisdiction over the public company?

This policy has several ramifications other than the obvious different treatment of foreign
shareholders. First, if the publicly held PMA company wants to change its capital ownership
which was last approved by the BKPM, the company must seek BKPM approval (it may also
be subject to any new foreign capital investment limitations in the 2016 DNI, if other changes
such as an additional line of business are requested). This is true even though that foreign
investor could increase its shareholding by purchasing additional shares on the public
market. The conclusion appears to be that, if the original foreign shareholder wanted to
increase its ownership beyond the limitation in the 2016 DNI, it could not do so, even if a
new foreign shareholder could. If the public company still has a PMA license, and the total
foreign investment of both the original foreign shareholder and new foreign shareholder
exceeds the DNI limit on foreign investment, is there a violation of the DNI? We do not
believe this should be the result because the new foreign shareholders’ shares are treated
as domestic capital. However, is that still true if the original foreign shareholder increases its
shareholding over the 2016 DNI limit by purchasing public shares? If so, then those shares
are not, in that case, treated as domestic capital. If such shares are treated as foreign capital
in the hands of the original foreign shareholder, and therefore violate the DNI limit, is the
same true if an affiliate of the original foreign shareholder purchases such shares? If a new
foreign shareholder wants to purchase the shares of the original foreign shareholder, BKPM
approval would apparently be required since there would be a change in the shareholder
composition affecting the original foreign shareholder’s share ownership. Finally, if a new

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foreign shareholder purchases the new shares acquired by an original foreign shareholder,
BKPM approval would apparently not be required.

As seen, the BKPM’s policy raises several difficult issues that hopefully will be clarified by
further regulations.

One reason the BKPM may wish to retain regulatory jurisdiction over such a company is
because the original foreign investor with a BKPM approval could assert it is entitled to
foreign exchange repatriation guarantees in the event foreign exchange controls were
adopted or the company were nationalized, benefits that are not available to other
shareholders of public companies. The BKPM may need to know these possible claims on
the country’s forex reserves. Perhaps this legitimate concern could be addressed by simply
requiring the original foreign shareholder to report changes in its original shareholding to the
BKPM. However, this is speculation on our part and this issue can best be clarified by BKPM
regulations.

C. Special Economic Zones: Article 8(2) dispenses with DNI limitations for a
company that is open for foreign investment but with requirements if the company is located
in a special economic zone, as long as the business field is not reserved for micro, small and
medium enterprises and cooperatives (koperasi).

D. Mergers, Acquisitions and Consolidations: Article 9 of the 2016 DNI lays

out special requirements for mergers, acquisitions and consolidations:

(a) in the case of a merger, the limitation on foreign ownership is that

which is contained in the surviving company’s principle license or
business license;

(b) in the case of an acquisition, the relevant limit on foreign ownership is

that in the principle license or business license of the acquired
company; and

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 (c) for a consolidation, the foreign capital limit is that which the 2016 DNI
specifies for a new company.

The result of these rules is that the only company that needs to be concerned about 2016
DNI limits on foreign capital is the consolidated company, which is a new company. In the
case of a merger or acquisition, the 2016 DNI will have no adverse effects on the foreign
capital limits, but if the 2016 DNI is more advantageous than the limits contained in their
business license, the foreign investor can apply for an increase (see Section F below).

This provision is identical to the 2014 DNI, except in the case of acquisitions. In the 2014
DNI, the foreign capital limit was that of the acquiring company. We believe such change
was necessary to clarify that when an acquisition occurs, neither the acquiring company nor
the acquired company needs to change their capital ownership.

By way of illustration, assuming PT X and PT A each hold business licenses for the
distribution business from 2005. PT X has a permitted foreign capital investment of 90
percent while PT A has 80 percent. PT X acquires PT A and as a consequence PT A’s
shareholders change. Pursuant to the 2016 Negative Investment List, the distribution
business is open for foreign capital investment up to 67 percent. Under Article 9 of the 2016
DNI, PT A does not have to decrease its foreign capital investment to 67 percent or less and
PT X may continue to hold 80 percent of PT A’s issued share capital.

E. Dilution: Article 10(1) of the 2016 DNI deals with the problem of a dilution of
the local shareholder’s equity percentage. This occurs when additional capital is required
and the domestic investor does not respond to the capital call. In that case the capital
contribution made by the foreign shareholder could cause its shareholding percentage to
exceed that permitted in the principle license or business license or the 2016 DNI.

In this situation the foreign investor is allowed to increase its percentage by subscribing to
the newly issued shares, in accordance with its pre-emptive right under Law No. 40 of 2007
Regarding Limited Liability Companies (August 16, 2007) (the “Company Law”). The foreign
shareholder’s ownership of such excess shares is limited to two years. At that time, the

9
foreign shareholder must transfer the excess shares to a domestic shareholder. There are
three methods to do so:

(i) a transfer of shares directly to a domestic shareholder;

(ii) a transfer of the excess shares through a public offering made on the
Indonesian stock exchange; or

(iii) the PMA company purchases the excess shares from the foreign shareholder
and treats such excess shares as treasury stock, subject to Article 37 of the
Company Law.

As an example of how Article 10 is applied, PT X engages in the geothermal power plant

business with a capacity of less than 10MW. This is currently open for foreign investment up
to 67 percent. PT X obtained its business license in 2015, which then allowed PT X to have
an 80 percent foreign investment. A is the foreign shareholder holding 80 percent and B is
the domestic shareholder holding 20 percent of the shares in PT X. PT X needs capital and
wants to issue new shares. A wishes to subscribe to 80 percent of PT X’s new issued
shares, but B does not want to subscribe to its preemptive right allotment. PT X is required
first to offer the new issued shares to A and B in proportion to their current capital ownership,
i.e., 80 and 20 percent. Since B does not want to subscribe to the new issued shares, A,
under Article 10 of the 2016 DNI, is permitted to subscribe to B’s allotment. This transaction
is permitted, provided that A transfers its excess foreign capital to a domestic shareholder no
later than two years after A subscribes to the new issued shares.

F. Advantageous Provisions: Article 13 provides that if the 2016 DNI has

provisions that are more advantageous to the foreign investor than those it now has, it is
entitled to the more advantageous provisions and can apply to the BKPM to obtain them.

G. Comparison Table: The table below is a comparison between the 2014 and
2016 Negative Investment Lists in relation to the foreign capital investment limitation on
various business lines in Indonesia:

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 COMPARISON TABLE

2016 Negative 2014 Negative

No Matters Information
Investment List Investment List
A. Agriculture
1 a. Plantation business with area of 25 ha or a. Maximum foreign Maximum foreign Item No. 13-60 in
more until certain size without processing unit investment – 95 investment – 95 percent Attachment III
percent
b. Plantation business with area of 25 ha or
more until certain size without processing unit b. Obligation of 20
percent plasma
c. Plantation business with area of 25 ha or plantation
more integrated with processing unit with
certain capacity of more than certain capacity

2 Plantation business of manufacture with a capacity a. Maximum foreign Maximum foreign Item No. 61-74 in
equivalent to or exceeding the specified capacity; investment – 95 investment – 95 percent Attachment III
percent

b. Minimum 20 percent
of raw materials must
originate from own
garden

B. Energy and Mineral Resources

3 Geothermal power plant with capacity of up to Maximum foreign Not listed and constitute Item No. 144 in
10MW investment – 67 percent as 100 percent open for Attachment III
foreign investment

4 Construction and installation of electrical utilization Maximum foreign 100 percent domestic Item No. 150 in

11
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
with high or extra high voltage investment – 49 percent capital investment Attachment III

5 Testing and analysis of construction and Maximum foreign 100 percent domestic Item No. 153 in
installation of electrical power of provision and investment – 49 percent capital investment Attachment III
utilization installation of electrical power with high
or extra high voltage

6 Manufacture of biomass pellets for energy Not listed and constitute Reserved for UMKMK UMKM is a small
as 100 percent open for partnership scheme and medium scale
foreign investment enterprises and
cooperatives

C. Industry
7 Sugar industry (white sugar, refined sugar and raw Reserved for UMKMK a. Maximum foreign Item No. 135 in
sugar) derived from cane with partnership in the partnership scheme investment – 95 Attachment II
form of plasma nucleus 20 percent of the land area percent

b. Requires special
license

8 Crumb rubber industry Requires special license 100 percent domestic Item No. 165 in
from the Ministry of capital investment and: Attachment III
Industry provided that the
industry is integrated with a. subject to the
rubber plantation recommendation from
development and: the Ministry of
Agriculture; and
a. completes at least 10

12
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
percent of the no less b. no transfer of capital
than 20 percent need ownership of the
for raw materials from company to foreign
own rubber plantation; investment company
and (PMA) is allowed.

b. completes maximum
80 percent of the need
for raw materials with
partnership scheme
with at least 20
percent of the
plantation area being
a plasma plantation.

D. Public Works
9 Construction implementation services with high a. Maximum foreign Maximum foreign Item No. 174 in
technology and/or risk and/or work value of more investment – 67 investment 67 percent was Attachment III
than Rp.50 billion percent applied to the construction
implementation services
b. Maximum 70 percent with high technology
for capital investors and/or risk and/or work
from ASEAN countries value of more than Rp.1
billion

10 Consultancy services of construction business with a. Increased foreign Maximum foreign Item No. 175 in
high technology and/or risk and/or work value of investment permitted investment 55 percent was Attachment III

13
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
more than Rp.50 billion maximum foreign applied to all construction
investment – 67 consultancy services
percent businesses

b. Maximum 70 percent
for capital investors
from ASEAN countries

E. Trade
11 Retail via mail order or via internet, specifically for Reserved for UMKMK 100 percent domestic Item No. 138 in
goods described in KBLI Code No. 47911, 47912, partnership scheme capital investment Attachment II
47913 and 47914

12 Distribution businesses with no affiliation to the Increased foreign Maximum foreign Item No. 196 in
production business investment permitted investment – 33 percent Attachment III
maximum foreign
investment – 67 percent

13 Warehousing Increased foreign Maximum foreign Item No. 197 in

investment permitted investment – 33 percent Attachment III
maximum foreign
investment – 67 percent

14 Direct selling through a network developed by a Not listed and constitute Maximum foreign N/A
business partner as 100 percent open for investment – 95 percent
foreign investment

15 Department stores with sales floor area of 400m2 – a. Increased foreign 100 percent domestic Item No. 181 in

14
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
2,000m2 investment permitted capital investment for Attachment III
maximum foreign department stores with
investment – 67 sales floor area less than
percent; and 2,000m2

b. Requires special
license from the
Ministry of Trade with
requirements:
1. Located in a Mall
and does not stand
alone

2. Addition of outlet
store based on
export performance
(pay performance)

16 Cold storage Not listed and constitute a. Maximum foreign N/A

as 100 percent open for investment – 33
foreign investment percent in Sumatera,
Java and Bali

b. Maximum foreign
investment – 67
percent in
Kalimantan, Sulawesi,
Nusa Tenggara,

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 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
Maluku and Papua

F. Tourism and Creative Economy

17 Two-stars, one-star and no-star Hotel Increased foreign a. Maximum foreign Item No. 228-230 in
investment permitted investment – 51 Attachment III
maximum foreign percent
investment – 67 percent Hotel business with
b. Does not contradict more than two stars
any local regulations is not listed under
the 2016 Negative
Investment List.
Therefore, it is open
100 percent for
foreign investment.

18 Travel agency a. Increased foreign a. Maximum foreign Item No. 226 in

investment permitted investment – 51 Attachment III
maximum foreign percent
investment – 67
percent b. Does not contradict
any local regulations
b. Maximum 70 percent
for capital investors
from ASEAN countries

19 Catering services a. Increased foreign a. Maximum foreign Item No. 227 in

investment permitted investment – 49 Attachment III
maximum foreign percent

16
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
investment – 67
percent b. Maximum 51 percent if
partnering with
b. Maximum 70 percent UMKMK
for capital investors
from ASEAN countries c. Does not contradict
any local regulations

20 Restaurant Not listed and constitute a. Maximum foreign N/A

as 100 percent open for investment – 51
foreign investment percent

b. Does not contradict

any local regulations

21 a. Bar Not listed and constitute a. Maximum foreign N/A

as 100 percent open for investment – 49
b. Café foreign investment percent

b. Maximum 51 percent if
partnering with
UMKMK

c. Does not contradict

any local regulations

22 a. Billiard house Increased foreign a. Maximum foreign Item No. 232, 233
investment permitted investment – 49 and 234 in

17
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
b. Bowling arena maximum foreign percent Attachment III
investment – 67 percent
c. Gold course b. Maximum 51 percent if
partnering with
UMKMK

c. Does not contradict

any local regulations

23 Swimming pool, football stadium, tennis court, Not listed and constitute a. Maximum foreign N/A
fitness center, sports center and other sports as 100 percent open for investment – 49
activities foreign investment percent

b. Maximum 51 percent if
partnering with
UMKMK

c. Does not contradict

any local regulations

24 Management of private museums a. Increased foreign a. Maximum foreign Item No. 224 in
investment permitted investment – 51 Attachment III
maximum foreign percent
investment – 67
percent b. Does not contradict
any local regulations
b. Maximum 70 percent
for capital investors

18
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
from ASEAN countries

25 Motel a. Increased foreign a. Maximum foreign Item No. 231 in

investment permitted investment – 49 Attachment III
maximum foreign percent
investment – 67
percent b. Maximum 70 percent
for capital investors
b. Maximum 70 percent from ASEAN countries
for capital investors
from ASEAN countries

26 Art impresario services a. Increased foreign a. Maximum foreign Item No. 237 in
investment permitted investment – 49 Attachment III
maximum foreign percent
investment – 67
percent b. Maximum 51 percent if
partnering with
b. Maximum 70 percent UMKMK
for capital investors
from ASEAN c. Does not contradict
countries any local regulations

27 Karaoke Increased foreign a. Maximum foreign Item No. 238 in

investment permitted investment – 49 Attachment III
maximum foreign percent
investment – 67 percent

19
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
b. Maximum 51 percent if
partnering with
UMKMK
c. Does not contradict
any local regulations

28 Organizer of meeting, incentive trip, conference, a. Increased foreign a. Maximum foreign Item No. 240 in
and exhibition (MICE) investment permitted investment – 51 Attachment III
maximum foreign percent
investment – 67
percent b. Does not contradict
any local regulations
b. Maximum 70 percent
for capital investors
from ASEAN countries

29 Management of historical and ancient sites such Increased foreign Maximum foreign Item No. 225 in
as temple, keraton, inscriptions, petilasan, and investment permitted investment – 51 percent Attachment III
ancient buildings maximum foreign
investment – 67 percent

30 Operation of natural tourism objects outside Increased foreign Maximum foreign Item No. 242 in
conservation area investment permitted investment – 51 percent Attachment III
maximum foreign
investment – 67 percent

31 a. Movie taking studio Not listed and constitute Maximum foreign N/A

20
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
as 100 percent open for investment – 49 percent
b. Movie processing laboratory foreign investment

c. Movie voice dubbing facility

d. Movie printing and/or duplication facility

32 a. Movie taking facility Not listed and constitute 100 percent domestic N/A
as 100 percent open for capital
b. Movie editing facility foreign investment

c. Movie subtitling facility

G. Transportation
33 Supporting business in terminals Increased foreign Maximum foreign Item No. 266 in
investment permitted investment – 49 percent Attachment III
maximum foreign
investment – 67 percent

34 Air transportation supporting services (computer- Increased foreign Maximum foreign Item No. 268 in
based reservation system, passenger and cargo investment permitted investment – 49 percent Attachment III
ground handling, and aircraft leasing) maximum foreign
investment – 67 percent

35 Airport related services Increased foreign Maximum foreign Item No. 269 in
investment permitted investment – 49 percent Attachment III
maximum foreign

21
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
investment – 67 percent

36 Maritime cargo handling services with CPC 7412 a. Increased foreign a. Maximum foreign Item No. 270 in
investment permitted investment – 49 Attachment III
maximum foreign percent
investment – 67
percent b. Maximum 60 percent
for capital investors
b. Increased maximum from ASEAN countries
70 percent for capital
investors from ASEAN
countries

c. Only valid for four ports

in Indonesia eastern
region, i.e., Bitung
Port, Ambon Port,
Kupang Port, and
Sorong Port
specifically for ASEAN
countries

37 Transportation management services or freight Increased foreign Maximum foreign Item No. 271 in
forwarding business investment permitted investment – 49 percent Attachment III
maximum foreign
investment – 67 percent

38 Air expedition freight forwarding services Increased foreign Maximum foreign Item No. 272 in

22
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
investment permitted investment – 49 percent Attachment III
maximum foreign
investment – 67 percent

39 General Sales Agent (GSA) of foreign airline Increased foreign Maximum foreign Item No. 273 in
company investment permitted investment – 49 percent Attachment III
maximum foreign
investment – 67 percent

40 International sea transport for goods (not including Maximum 70 percent for Maximum 60 percent for Item No. 251 in
cabotage) capital investors from capital investors from Attachment III
ASEAN countries ASEAN countries

41 Land-based passenger transportation on Increased maximum 100 percent domestic Item No. 246 in
scheduled routes (intercity and interprovincial foreign investment – 49 capital Attachment III
transportation, suburban transportation, in- percent
province intercity transportation, urban/suburban
transportation, and cross-countries transportation)

42 Salvage service and/or underwater works Requires special license Maximum foreign Item No. 265 in
from the Ministry of investment – 49 percent Attachment III
Transportation

43 Provision and operation of river and lake harbor Increased maximum Requires cooperation with Item No. 275 in
foreign investment – 49 the company appointed by Attachment III
percent the Government of the
Republic of Indonesia

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 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
44 Provision and operation of cross-border water Increased maximum Requires cooperation with Item No. 274 in
harbor foreign investment – 49 the company appointed by Attachment III
percent the Government of the
Republic of Indonesia

45 Provision of harbor facilities (jetties, buildings, tugs a. Maximum foreign a. Maximum foreign Item No. 263 in
at cargo container terminals, liquid-bulk terminal, investment – 49 investment – 49 Attachment III
dry-bulk terminal, and roll on-roll off (ro-ro) percent percent
terminal)
b. Requires special b. Maximum foreign
license investment – 95
percent with a public
partnership
arrangement

H. Communications and Informatics

46 Implementation of trading transaction through Maximum foreign Not listed and constitute Item No. 300 in
electronic system (platform based market place, investment – 49 percent as 100 percent open for Attachment III
daily deals, price grabber, classified foreign investment
advertisement) with investment value of less than If the investment value is The KBLI classifies
Rp.100 billion more than Rp.100 billion, e-commerce
then this business line is business for general
100 percent open for goods in Code No.
foreign investment. 47919. KBLI Code
No. 47911, 47912,
47913 and 47914
classifies e-
commerce business

24
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
for certain goods,
which are entirely
close for foreign
capital investment.

47 Operation of content provision telecommunication Increased maximum Maximum foreign Item No. 287 in
service (ringtone, premium short message foreign investment – 67 investment – 49 percent Attachment III
services, etc.) percent

48 Information center (call center) and other Increased maximum Maximum foreign Item No. 288 in
telephone added value service foreign investment – 67 investment – 49 percent Attachment III
percent
49 Internet service provider Increased maximum Maximum foreign Item No. 289 in
foreign investment – 67 investment – 49 percent Attachment III
percent

50 Data communication system services Increased maximum Maximum foreign Item No. 290 in
foreign investment – 67 investment – 49 percent Attachment III
percent

51 Public internet telephone services Increased maximum Maximum foreign Item No. 291 in
foreign investment – 67 investment – 49 percent Attachment III
percent

52 Internet interconnection services (network access Increased maximum Maximum foreign Item No. 292 in
point), other multimedia services foreign investment – 67 investment – 49 percent Attachment III
percent

25
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List
I. Finance
53 Securities company (perusahaan penjaminan) Increased maximum Not listed and constitute Item No. 313 in
foreign investment – 30 as 100 percent open for Attachment III
percent foreign investment

J. Manpower
54 Work training (to provide, obtain, enhance and Increased maximum Maximum foreign Item No. 322 in
develop work competency, productivity, discipline, foreign investment – 67 investment – 49 percent Attachment III
attitude and work ethics among others in the area percent
of technical and engineering, business
administration, language, tourism, management,
information technology, art and agriculture
vocation directed to provide the work force in
entering the working world)

K. Health
55 Industry of pharmacy raw materials Not listed and constitute Maximum foreign N/A
as 100 percent open for investment – 85 percent
foreign investment

56 Consultancy services of business and Not listed and constitute Maximum foreign N/A
management and/or hospital management as 100 percent open for investment – 67 percent
services foreign investment

57 Health support services (rental of medical Not listed and constitute Maximum foreign N/A
equipment) as 100 percent open for investment – 49 percent
foreign investment

26
 2016 Negative 2014 Negative
No Matters Information
Investment List Investment List

58 Health support services: Not listed and constitute Maximum foreign N/A
as 100 percent open for investment – 67 percent
a. Clinic laboratory foreign investment

b. Medical check-up clinic

59 Industry of class A health equipment (cotton, a. Maximum foreign Business of industry of Item No. 346 in
bandage, gauze, stick, IV pole, sanitary napkin, investment – 33 health equipment in all Attachment III
adult diaper, patient bed, wheelchair) percent classes were not listed
and constitute as 100 Industry of class B,
b. Requires special percent open for foreign C and D health
license from the investment equipment can be
Ministry of Health found in item No.
347, 348 and 349 in
Attachment III and
require special
license from the
Ministry of Health.

60 Cell and tissue bank and laboratory Requires special license Not listed and constitute Item No. 350 in
from the Ministry of Health as 100 percent open for Attachment III
foreign investment

27
This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at
the user’s own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be
reproduced without the express written consent of SSEK.

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