Indonesia Relaxes Foreign Investment Limits For 29 Sectors

Indonesia, Asia’s fourth-largest economy, announced Thursday that it will allow full foreign ownership in 29 businesses that were previously restricted or closed as it seeks to boost foreign investment and jobs in the country, according to local media reports. Policymakers threw the doors open for non-Indonesians to hold 100 percent stakes in industries such as cold storage, toll roads, movie halls and restaurants to spur economic growth, which declined to a six-year low in 2015.

In addition to the 29 industries with no limit on foreign ownership, the Indonesian lawmakers also raised the number of business sectors in which foreign investors are allowed to set up small- and medium-sized enterprises to 110 from 62 sectors. The maximum foreign-investment limit in golf courses, health support services and airport support will be raised to 67 percent.

The much-watched e-commerce sector, however, did not see any revision and continued to have investment caps.

“In e-commerce business, a player with total equity of up to Rp100 billion ($7.41 million), foreign investors’ ownership is capped at 49 per cent,” Coordinating Minister for the Economy Darmin Nasution reportedly said.

“This is the first round, there will be a second and a third,” Indonesian President Joko Widodo said in a Bloomberg TV interview Thursday, adding that the rules will be changed in 49 sectors. The government reportedly plans to raise the permissible foreign ownership limits in dozens of business lines, including distribution, warehousing, travel agencies and services that support air transport.

Indonesia, which has been wary about opening its markets, is now looking to rope in foreign capital to offset its weaker export performance and job cutbacks by Ford Motor Co., Panasonic Corp. and Toshiba Corp. The move came "in anticipation of something that cannot be bargained anymore," Cabinet Secretary Pramono Anung reportedly said.

“With this revised investment guidance list, our aim is to open a wider labor market while strengthening our pool of capital,” Anung reportedly said from the presidential palace in Jakarta Thursday.

Indonesia’s list of industries in which overseas capital is restricted — known as the negative investment list — was last revised in 2014 under the previous administration.

“Indonesia has hardly flung the doors wide open to foreign direct investment,” Glenn Maguire, chief economist for Asia-Pacific at Australia & New Zealand Banking Group Ltd., said in a report cited by Bloomberg. “They have clearly opened, but one or two gatekeepers have been added.”