Limitation on Foreign Investment

Oct 14, 2020 | Investasi, Korporasi | 0 comments

Not all business fields are open to foreign investment. Under Presidential Regulation No. 44 of 2016 the Daftar Negatif Investasi (DNI) – Investment Negative List, business sectors are either completely ‘closed to’ investment or ‘conditionally open’ (meaning that they are subject to foreign ownership limits or require special arrangements and permits). The Negative List prohibits any investment activities from being conducted in those fields, whether by the PT PMA itself or by subsidiaries of the company. Decisions to close business fields to foreign investment are based on health, moral, cultural, environmental, national defence, security concerns and other national interests.

Business sectors that are not mentioned in the Negative List are, in theory, considered completely open to investment from non-Indonesian investors but this is not necessarily the case in practice. Article 3 of the Negative List confirms that business sectors that are not specifically mentioned are unconditionally open for investment. However, it would be prudent to re-confirm with BKPM (as the government institution that administers the enforcement of the foreign ownership limitations provided in the Negative List other than those in the banking, finance and mining sectors) that there is no unwritten policy in place, or condition imposed, that restricts foreign investment into business lines that are not listed in the Negative List. Where new business sectors have been introduced, although a new foreign ownership limit may now apply where previously there was no formal restriction, investors at least have some certainty as to what restriction or condition applies.

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