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1 June, 2016
The Indonesian government recently issued Presidential Regulation No. 44 of 2016 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment (“Regulation No. 44/2016”), which changes the permitted levels of foreign investment including in relation to communications and informatics.
1. Background
Foreign entities must obtain a license issued by BKPM (the Investment Coordinating Board) in order to conduct business in Indonesia. The Indonesian government has issued a number of Presidential Regulations setting out a list of sectors that are either wholly closed to foreign investment or in which foreign investment in the entity licensed by BKPM is limited to a certain percentage (the “Negative List”).
2. Changes to the Negative List
Regulation No. 44/2016 makes a number of changes to the Negative List, and effectively replaces Presidential Regulation No. 39 of 2014 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment.
Notably, for communications and informatics:
telecommunication services: the maximum foreign capital ownership for a range of telecommunication services, including content services, call centres and VAS, internet service providers, data communications services, public internet telephony services, internet interconnection services and other multimedia services has been revised upwards from 49% to 67%;
wired/wireless/satellite telecommunications: the maximum foreign capital ownership for both wired and wireless/satellite telecommunication service providers, as well as wired/wireless/satellite telecommunications services integrating with other telecommunication service providers such as internet service providers and data communications services, has been revised from 65% to 67%;
e-commerce operators: a category which was not previously limited in terms of foreign investment levels, the maximum foreign capital ownership in operators of trading transactions through electronic systems (e.g. marketplace-based platforms, daily deals, price grabber, classifieds) with investments less than 100 billion Rupiah (approximately US$7.35 million) is now 49% (but 100% still applies if the investment value is higher); and
retail e-commerce: a category which was previously closed in terms of foreign investment, retail e-commerce in relation to food and beverages, tobacco, chemical, cosmetics, laboratory equipment, textile, clothing, footwear, personal items, household goods and kitchen equipment is now open to 100% foreign ownership provided that it is in partnership with micro, small, and medium scale enterprises and co-operatives (“Local SMEs”). However, retail e-commerce in other goods remains closed to foreign ownership.
Set out below is a more detailed summary for communications and informatics.
Telecommunications and satellite:
|
Business Field |
Requirements |
Changes (Yes/No) |
Comment |
|
Management and operation of radio frequency spectrum and satellite orbit monitoring stations |
Closed to investment |
No |
N/A |
|
Home and building cable wiring Internet kiosk |
Reserved for Local SMEs |
No |
N/A |
|
Providers, operators (leasing and operating) and provision of construction of telecommunication towers |
100% domestic capital |
No |
N/A |
|
Telecommunications services: Content services (ringtone, premium short message services, etc) Call centres and other value added telephony services Internet service providers Data communications services Public internet telephony services Internet interconnection services (network access point), other multimedia services |
67% |
Yes |
Increased from 49% to 67% |
|
Wired/wireless/satellite telecommunications services Wired telecommunications services Wireless/satellite telecommunications services |
67% |
Yes |
Increased from 65% to 67% |
|
Wired/wireless/satellite telecommunications services integrating with internet service providers, data communications services, public internet telephony services, internet interconnection services (network access point), or other multimedia services |
67% |
Yes |
Increased from 65% to 67% |
|
Telecommunications kiosk |
100% |
Yes |
Previously only reserved for Local SMEs |
|
Establishment of a telecommunications device evaluation agency (laboratory test) |
100% |
Yes |
Increased from 95% to 100% |
e-Commerce:
|
Business Field |
Requirements |
Changes (Yes/No) |
Comment |
|
Operators of trading transactions through electronic systems (e.g. marketplace-based platforms, daily deals, price grabber, classifieds) with investments more than 100 billion Rupiah (approximately US$7.35 million) |
100% |
No |
N/A |
|
Operators of trading transactions through electronic systems (e.g. marketplace-based platforms, daily deals, price grabber, classifieds) with investments less than 100 billion Rupiah (approximately US$7.35 million) |
49% |
Yes |
Not previously limited |
|
Retail e-commerce in relation to food and beverages, tobacco, chemical, cosmetics, laboratory equipment, textile, clothing, footwear, personal items, household goods and kitchen equipment |
100% foreign ownership allowed provided it is in partnership with Local SMEs |
Yes |
Previously limited to 100% domestic capital |
|
Retail e-commerce in relation to other goods |
100% domestic capital |
No |
N/A |
Media:
|
Business Field |
Requirements |
Changes (Yes/No) |
Comment |
|
Broadcasters: Private Broadcasters Subscription Broadcasters |
100% domestic capital and special licences/permits (for business expansion and development only, maximum foreign capital ownership of 20% and subject to broadcasting laws and regulations) |
No |
N/A |
|
Public broadcasters: radio and television |
Special licences/permits (monopolised by public broadcasters (Radio Republik Indonesia (RRI), Televisi Republik Indonesia (TVRI) and local public broadcasters (LPPL)) |
No |
N/A |
|
Radio and television community broadcasters |
Reserved for Local SMEs |
No |
N/A |
|
Publishing of newspapers, magazines and bulletins (press) |
100% domestic capital |
No |
N/A |
Postal services:
|
Business Field |
Requirements |
Changes (Yes/No) |
Comment |
|
Postal Services |
49% |
No |
N/A |
3. Impact of the changes
Pursuant to Article 13 of Regulation No. 44/2016, the changes to the Negative List do not apply to investment in specified business fields approved prior to the regulation being issued, unless such provisions are of more benefit to the relevant investment.
Indirect or portfolio investment with transactions being made through domestic capital markets continue to be permitted.
For further information, please contact:
Mark Robinson, Partner, Herbert Smith Freehills
mark.robinson@hsf.com
