You are here

Indonesia to ease foreign ownership caps

Restrictions will be eased in areas that can support country's digital economy

BT_20190816_INDONFDI16_3863898.jpg
Mr Lembong says that a new round of changes in the negative investment list will be announced before the end of 2019.

Jakarta

INDONESIA will unveil plans for increasing how much foreign investors can own of businesses in some sectors by year-end, the head of the country's investment board told Reuters.

Thomas Lembong, who leads the agency known as BKPM, also indicated that the government is looking to ease restrictions in areas that can support Indonesia's booming digital economy.

President Joko Widodo, who begins a second five-year term in October, has vowed a renewed push for structural reform in South-east Asia's largest economy, where tepid investment has contributed to keeping the growth rate at around 5 per cent in recent years.

sentifi.com

Market voices on:

A new round of changes in the so-called "negative investment list", which bars foreigners from some sectors and caps their ownership level in others, should be announced before the end of 2019, Mr Lembong said.

In 2016, Mr Widodo shortened the negative list in what he dubbed a "Big Bang" shake-up of restrictions, opening sectors ranging from retail to telecommunication.

While the move drew investment in some businesses, such as film-making, foreign direct investment (FDI) has remained sluggish, particularly ahead of general elections in April. FDI, excluding oil and gas as well as banking, was US$29.3 billion in 2018, down from US$32.2 billion a year earlier, BKPM data showed.

After winning re-election in April, Mr Widodo pledged to go all-out to boost the economy, including by revising the negative list to improve the investment climate, loosening restrictive labour laws and cutting corporate tax rates.

Mr Lembong said that coming revisions will "drastically" open the university sector to 100 per cent foreign ownership within special economic zones or 67 per cent for locations anywhere else. "And then there will be some surprises, which I obviously cannot spoil," he said in an interview.

He said that one aim of the revisions will be supporting Indonesia's booming digital economy. "You know the unicorns, the startups are raising staggering sums of money. But there are other supporting industries that are similarly capital intensive that are surprisingly closed to foreign investment as of now," he said, without elaborating.

"I think it makes all the sense in the world to open up those sectors as well," said Mr Lembong, a former investment banker and founder of a private equity fund.

In the past, Indonesia's FDI has mostly been in resource-related and consumer sectors, but recently the tech sector has been attracting large investments.

According to Alphabet Inc's Google and Singapore state investor Temasek Holdings (Pte) Ltd, Indonesia's Internet economy is the region's largest and fastest-growing, worth US$27 billion last year and forecast to hit US$100 billion by 2025. REUTERS