Mar

23

Positive Investment List vs Negative Investment List

The Job Creation Law (IndonesianUndang-Undang Cipta Kerja), officially Law No. 11 of 2020 (hereinafter referred to as Omnibus Law), is a bill that was passed on 5 October 2020 by Indonesia’s People’s Representative Council (DPR), and enacted on 2 November 2020 to create jobs and raise foreign and domestic investment by reducing regulatory requirements for business permits and land acquisition processes.

Several regulations for the implementation of the Omnibus Law have been issued. Generally, it is to improve the ecosystem and investment competitiveness. One of them is Presidential Regulation No. 10 of 2021 on Investment Business Sector (hereinafter referred to as “Presidential Regulation No. 10/2021”) in place of Presidential Regulation No. 44 of 2016 on Closed Business Fields and Open Business Fields With Requirements in the Field of Investment, which revoked several off-limit sectors for investors. In this regulation, the government applies the Positive Investment List as the basis for granting business licenses, which contain a so-called priority list that promises potential investors fiscal and non-fiscal incentives and scraps some restrictions on foreign investment. We believe that Omnibus Law and its implementing regulation can develop and increase the investments in Indonesia, both domestic and foreign.

Article 2 of Presidential Regulation No. 10/2021 stipulates that all business sectors are open for investment activities, except for:

  1. business fields which are declared closed for investment. Further provisions refer to Investment Law that has been replaced by Omnibus Law.
  2. activities of the central government, such as the service sector or within the framework of defense, security, and of strategic importance.

Article 3 of Presidential Regulation No. 10/2021 also stipulates four classifications of positive investment list, as follows:

  1. priority business fields (Appendix I), include technology transfer, pioneering, research-oriented, capital-intensive, and labor-intensive industries, as well as national strategic projects.The government provides tax holidays, tax allowance, and investment allowance for investors that expand their businesses or make new investments in these priority business sectors.
  2. business fields reserved for micro, small and medium enterprises (MSMEs), as well as cooperatives (Appendix II).
  3. business fields that stipulate specific requirements (Appendix III), which do not apply to investment activities conducted in Special Economic Zone.
  4. business fields excluded from the three categories above.

In setting investment requirements, there are six business areas closed for investment such as the cultivation/drug industry, all forms of gambling, fishing the species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the retrieval/utilization of natural corals including recent death coral, chemical weapons industry and ozone-destroying chemicals industry.

Furthermore, The Head of the Indonesian Investment Coordinating Board (BKPM), Bahlil Lahadalia, mentioned that Presidential Regulation No. 10/2021 will encourage more competitive investment, as well as the development of priority business fields, and is very different from the previous regulation that limit the investments. Presidential Regulation No. 10/2021 becomes one of the four implementing guidelines of the Omnibus Law related directly to business licensing that becomes the authority of BKPM.

Some differences between Presidential Regulation No. 10/2021 (Positive Investment List) and Presidential Regulation No. 44/2016 (Negative Investment List), among others:

CATEGORIES
NEGATIVE INVESTMENT LIST
POSITIVE
INVESTMENT LIST
PRIORITY BUSINESS FIELDSNone245 business fields
BUSINESS FIELDS CLOSED FOR INVESTMENT20 business fields6 business fields
BUSINESS FIELDS RESERVED FOR MSMEs145 business fields163 business fields in 89 business groups.
BUSINESS FIELDS THAT STIPULATE  SPECIFIC REQUIREMENTS350 business fields46 business fields

Related to foreign investment, Article 7 of Presidential Regulation No. 10/2021 states that foreign investment can only conduct business activities in Large Enterprises with the total investment value greater than Rp.10.000.000.000,- (ten billion Rupiah) excluding land and buildings, and must be in the form of a limited liability company under Indonesian law. And should be domiciled within the territory of the Republic of Indonesia unless otherwise provided by law. One of the interesting things in this Presidential Regulation No. 10/2021 is that the foreign investment can be with an investment value equal to or less than Rp.10.000.000.000,- (ten billion Rupiah) excluding land and buildings, in the Special Economic Zone for the field of technology-based start-ups.

There are some pros and cons of the regulation, which recently, as on 2 March 2020, with the inputs from religious figures, organizations, and also from the province and region, President Joko Widodo decided to revoke the attachment of the Presidential Regulation No. 10/2021 related to the opening of new investments in the liquor industry.

Schinder Law Firm commits to support  investment development in Indonesia by leading our Clients with the correct and appropriate information and regulations. Should you need  legal advisory or consultation for investment within Indonesia, please do not hesitate to contact us. Drop us an email at info@schinderlawfirm.com.

Source: Indonesian Investment Coordinating Board

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