26
Jul2021

Good Wind for Investors?: Enactment of the Presidential Regulation Number 10 of 2021 concerning Investment Business Activites

The government had reformed various regulation related to the economic sector. This action is taken in hope that the new regulatory will facilitate the easier procedure to attract more investment funding, which later boost investment growth in Indonesia. The government reformed relevant regulations through the Law Number 11 of 2020 concerning Job Creation (“Job Creation Law”) in November 2020.

In February 2021, the President has issued Presidential Regulation Number 10 of 2021 concerning Investment Business Activities (“PR 10/2021”), commonly known as the Indonesian Positive Investment List. The enactment of PR 10/2021 revoked the previous investment regulation under Presidential Regulation Number 44 of 2016 concerning List of Closed Business Field and Open Business Fields with Requirements in the Investment Field (“PR 44/2021”) or known as the Indonesian Investment Negative List.

On this occasion, we will only focus on discussing the changes that has occurred after PR 10/2021 enacted. Does the shift to this regulation really provided easier facilities for investor to invest in Indonesia? To answer the previous question, we highlight a few key points for our discussion.

Introducing the New Priority Business Field Concept

Referring to the provisions of Article 2 paragraph (1) of PR 44/2016, the field of business in investment activities is divided into 3 (three) types, namely (a) open business fields; (b) closed business fields; (c) and open business fields with requirements. Meanwhile in the new provisions, it is stipulated under Article 2 paragraph (1) that all business fields in investment activities are open unless the business field is explicitly declared closed or is part of the business field that can only be conducted by the Central Government.

The Open Business Field referred to in PR 10/2021 consists of:

  1. Priority business field;
  2. Allocated business areas or partnerships with Cooperatives and MSMEs;
  3. Open business fields with certain requirements;
  4. Open business which is open for all Investors.

The latest breakthrough that is very visible in PR 10/2021 is by introducing the concept of priority business fields, in this case the Government provides a variety of incentives both in the fiscal and non-fiscal sector for investors. Regarding the incentives that must be received by the priority business field shall be noted down below.

The fiscal incentives offered incentives in terms of taxes (i.e tax allowances, tax holiday, investment allowances) and import duty exemption. And for the non-fiscal incentives includes ease of business licensing, provision of supporting infrastructure, guarantee of availability of raw materials, immigration, and employment.

The shift in this provision certainly provides new hopes for businesses actors and consistent with the Government’s desire to create a more positive investment environment in Indonesia.

The Priority Business Field must fulfill the following criteria :

  1. National strategic programs/projects;
  2. Capital intensive;
  3. Labor intensive;
  4. High technology;
  5. Pioneer industry;
  6. Export orientation; and/or
  7. Orientation in research, development, and innovation activities.

Lifting the Restriction on the Previous Closed Business Field

Furthermore, the ease to enter investment activities in Indonesia that quite significant is by the reduced of restrictions on the business activities. Referring back to the provisions of PR 44/2016, there are at least 20 (twenty) types of business activities classified under closed business fields.

Now under the Job Creation Law, amendments to Article 12 of Law 25/2007, the Government only stipulates 6 (six) types of business activities that are closed to be entered by investors. But on March 2, 2021, President Jokowi revoked the opening of new investments in alcohol-beverages industries so that this business activity is again listed under closed business fields.

In conclusion, the business activities which classified as closed business fields under the new investment regulation, namely :

  1. Narcotics cultivation and industry class I;
  2. All forms of gambling and/or casino;
  3. Catching fish which classified under Appendix I Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);
  4. Utilization or taking of coral and utilization or taking corals from nature, which is used for the material building/lime/calcium, aquarium, and souvenir/jewelry, as well as living coral or death coral (recent death streak) of nature;
  5. Chemical weapons manufacturing industry;
  6. Industrial chemicals and industry ozone-depleting substances; and
  7. Liquor industry or alcohol-beverages industry.

Comparison Between the PR 44/2016 and PR 10/2021

The table below illustrates some of the changes under PR 44/2016 and PR 10/2021 in specific sectors.

  • The Shift from Closed Business Field to Open Business Field
Business Activities Classification of Business Field
PR 44/2016 PR 10/2021
Aviation navigation services  

 

Closed

 

 

Open

Terminal for land transportation passenger
Radio frequency spectrum and satellite orbit monitoring station

 

  • The Changes in Open Business Field with Requirements
Business Activities Classification of Business Field
PR 44/2016 PR 10/2021
Plantation with a total area of at least 25 hectare or more Maximum 95% foreign ownership (with obligation to establish 20% plasma plantation)  

 

 

 

Open

Oil and gas construction (platform) Maximum 75% foreign ownership
Electricity generation above 10 MW Maximum 95% foreign ownership (up to 100% in PPP schemes during concession)
Two-star hotel Maximum 67% foreign ownership Open and listed under priority list
Newspaper, Magazine, and press 100% domestic ownership 100% domestic ownership in establishing the business. 49% foreign investment for its development
Hospital 67% foreign ownership (up to 75% for ASEAN investor) Open

 

DISCLAIMER

Any information in this article is provided for informational purposes only and should not be considered as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this Legal Updates without seeking legal or other professional advice.

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