Indonesia liberalizes foreign investment rules in key sectors

In a bid to boost foreign investment, Indonesia’s government has issued a new investment regulation (The Presidential Regulation No. 10/2021) which includes the significant removal of existing restrictions on foreign investment.

The new rules will come into effect 30 days from Feb. 2.

The new Regulation is in the form of a priority list that provides fiscal and nonfiscal incentives to the investors and scraps the government’s negative investment list (DNI). 

It covers high-tech, pioneering, export-oriented, research-oriented, capital-intensive, and labor-intensive industries, as well as national strategic projects. Exceptions include six prohibited sectors- including narcotics and gambling – and businesses that can be carried out by the government.

100% foreign ownership has been introduced in the following sectors:

  1. Wholesale/distribution
  2. Pharmaceuticals-  Pharma manufacturing and wholesale/distribution are now 100% open to foreign ownership.
  3. Independent power plant companies (typically referred to as IPPs)
  4. Plantation and Agricultural sector
  5. Medical sector- the klinik utama category (specialized medical clinics that provide such services as dental, nursing, and rehabilitation services) is now 100% open to foreign ownership 
  6. Self-owned e-commerce business is now 100% open to foreign ownership and the IDR 100 billion investment requirement has been abolished.

Also, the New List identifies 245 business fields as priority sectors to be assisted by fiscal and non-fiscal incentives. Fiscal incentives comprise tax holidays and allowances, plus investment and customs & excise facilities. Non-fiscal incentives include licensing, infrastructure, energy, raw-material, immigration, labor, and other facilities. However, to give effect to these incentives and facilities, further implementing regulations will be required.

It is expected that the law will help prop up direct investment in Southeast Asia’s biggest economy. If you have a query in relation to doing business in Indonesia then contact our local business specialist from Indonesia at Mega Rizkiani at jakarta@d-b-in.com

Jakarta Business Specialist Mega Rizkiani

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