Indonesia’s positive investment list explained.

A positive investment list in Indonesia came into force on 4 March 2021 to replace the negative investment list.

It aimed to increase investment in Indonesia and open business fields to both local and foreign investors regardless of size: small, medium and large (read our article on Indonesia’s moves to encourage foreign direct investment).

What is the positive investment list?

The positive investment list lists the business sectors that are open to both foreign and domestic investors.

Business sectors are 100% open to foreign investment unless it is subject to specific requirements.

This new list opens up business opportunities in sectors that were previously forbidden or restricted to investors, such as:

• Construction services
• Distribution
• Energy
• Telecommunications
• Transportation

Even though the positive investment list allows investors to invest in a majority of business fields, there are also sectors that are still closed and only open to the government or other authorities.

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Types of business fields open to investment

According to the Presidential Regulation Number 10 of 2021 (PR 10/2021), business fields open to investment are classified into four categories:

1. Priority sectors
2. Business fields allocated to or require partnership with cooperatives and small- and medium-sized enterprises (SMEs)
3. Business fields that require specific requirements or limitations
4. Business fields open to any investor

Priority sectors

Priority business sectors consist of 245 sectors as listed in Annexe one of the PR 10/2021 and are businesses that meet the following conditions:

• Is a strategic national program or project
• Capital intensive
• Labour intensive
• High advanced technology
• Pioneer industry
• Exported-oriented
• Oriented in research & development and innovation activities

Priority business fields are granted fiscal and non-fiscal incentives.

Fiscal incentives include:

• Tax incentives, which include:
  • Income tax for investment in specific businesses (tax allowances)
  • Corporate income tax reduction (tax holiday)
  • Investment allowances
• Import duty exemptions

Non-fiscal incentives consist of:

• Ease of business licensing
• Guaranteed availability of energy
• Guaranteed availability of raw materials
• Incentives for immigration, employment and other conveniences regulated in the law and regulations

Business fields allocated to or require partnership with cooperatives and small- and medium-sized enterprises

Annexe two lists 89 nine business lines under this category and classifies business fields into two groups:

1. Business fields allocated to cooperatives and local SMEs
   1. Business activities that do not use advanced technologies
   2. Business activities that require a maximum capital of IDR 10 billion, excluding land and building
   3. Business activities that are labour-intensive and have specific cultural heritages
2. Business fields open for businesses in partnerships with cooperatives and local SMEs
   1. Business sectors conducted by SMEs or cooperatives
   2. Business sectors that have the potential to enter the large supply chain

Business fields that require specific requirements or limitations

Annexe three lists 46 business sectors that fall into the business fields which require specific requirement and limitation category.

Business sectors under this category are open to all investors, but they have to meet the following requirements:

• Investment capital requirements for domestic investors
• Investment capital requirements with limitations on foreign investors, which can be waived by:
  • An investment made through the Indonesian Stock Exchange (IDX)
  • An investment made in a special economic zone (Sei Mangkei, Tanjung Lesung, Palu, Mandalika, Galang Batang, Arun Lhokseumawe, Tanjung Kelayang, Bitung, Morotai, Maloy Batuta Trans Kalimantan and Sorong)
  • Investors who have been granted special rights under an agreement between their country and Indonesia
  • An investment made before the introduction of the new investment list
• Investments that require a special license and/or approval from relevant authorities

Business fields open to any investor

Businesses fields under this category are open to all investors, both foreign and local investors, without any restrictions.

Previously in the negative investment list, certain business fields were restricted to foreign investment, but now under the positive investment list, these business fields are open to 100% foreign investment.

These include:

• Cable telecommunication activities
• Crude palm kernel oil industry
• Crude palm oil industry
• Fee or contract basis real estate
• Free-range chicken breeding and livestock activities
• General distributorship activities
• Internet service provider
• Online retailer
• Palm plantation
• Satellite telecommunication activities
• Web portal and/or digital platform for commercial purposes
• Wholesale trade of laboratory, pharmacy and medical equipment

Types of business fields closed for investment

Even though most business fields are open to 100% foreign and local investment, six business fields remain closed for investment and business fields that only the central government can conduct.

The six business fields are:

• Cultivation and industry of class one narcotics
• Gambling and casino activities
• Fishing of endangered species
• Chemical weapon manufacturing
• Collecting and using coral from nature for materials, jewellery and souvenirs
• Industrial chemical and ozone-depleting substances

Businesses only open to the central government are activities that regard the defence and security sector.

Conclusion

The 2016 negative investment list was revoked and replaced by the 2021 positive investment list and opened more opportunities for local and foreign investment. If you are a foreign investor and is interested in establishing a business in Indonesia, Acclime can assist you in preparing and registering your business.