24 Jun 2021
The Government Amends Investment List: Is this Latest Cut the Deepest?

On May 25, the government issued an updated investment list as Presidential Regulation No. 49 of 2021 (“PR 49/2021”), which amends “PR 10/2021”, published in February this year. For further details on PR No. 10/2021, please refer to our update here.

PR 49/2021 is focused on foreign investment restrictions on the drinks industry, such as Alcoholic Beverages within Indonesia Standard IndustrialClassification (“KBLI”) 11010, Wine (KBLI 11020), and Alcoholic Beverages Made from Malt (KBLI 11031).

E-commerce involving goods listed under KBLIs 47911 (food and beverages, tobacco, chemicals, pharmacy, cosmetics, and laboratory equipment), 47912 (textile, clothes, footwear and personal equipment) and 47913 (household and kitchen equipment), is now also closed to foreign investment, as these items are now allocated to cooperatives and Micro, Small and Medium enterprise (SMEs). Previously, under PR 10/2021, these activities were not listed, which meant they were, in principle, open to foreign investment.

Also covered in the update are courier activities (KBLI 53101), previously unlisted, but now limited to 49% foreign shareholding. However, postal activities (KBLI 53100), previously limited to maximum 49% foreign shareholding, is now removed from PR 49/2021.

The following changes listed in Attachments I, II and III of PR 49/2021 are also relevant:

  1. Instead of the 46 business fields listed previously, 37 are now subject to specific requirements, classified as those:
    1. open to FDI but subject to maximum foreign shareholding;
    2. open to FDI but subject to special approval from the sectoral ministry concerned;
    3. 100% reserved for domestic investors;
    4. certain business fields that are limited, supervised or regulated by a separate regulation on supervision and control of alcohol beverages. This is an additional classification under PR 49/2021, which includes wholesale of alcoholic beverages (KBLI 46333), retail of alcoholic beverages (KBLI 47221) and (on-street) vending of alcoholic beverages (KBLI 47826);
  2. Instead of 51 business fields previously, 60 are now reserved for cooperatives and SMEs; and
  3. The Government has increased the number of business fields subject to partnerships from 38 to 46.

ABNR Commentary

By means of PR No. 49/2021, the Government has responded to demands from domestic stakeholders who had raised concern over the February list. In particular, the opening up of alcoholic beverage production to foreign investment raised strong opposition from religious groups. These demands appear to have been met in PR 49/2021, and the list is likely to remain in effect for the next few years.

It should be noted, however, that in practice, the list itself was not a definitive indication of what was permissible: Even if a particular KBLI was unlisted, it did not necessarily follow that the business activity it represented was automatically 100% open to foreign investment. Sectoral legislation may result in additional restrictions: We understand that some ministries are currently working on new regulations that may create new hurdles for foreign investment, potentially in contradiction to the new investment list.

Consequently, the safest advice is always to check with the Investment Coordinating Board (BKPM), which was recently elevated to ministry status (with cabinet-level responsibility for investment), before making investment decisions of significance.

By partner Ms. Elsie F. Hakim (ehakim@abnrlaw.com), foreign counsel Mr. Gustaaf Reerink (greerink@abnrlaw.com), and senior associate Ms. Yohanna Fifinella (yfifinella@abnrlaw.com).

This ABNRNewsand its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.

NEWS DETAIL

24 Jun 2021
The Government Amends Investment List: Is this Latest Cut the Deepest?

On May 25, the government issued an updated investment list as Presidential Regulation No. 49 of 2021 (“PR 49/2021”), which amends “PR 10/2021”, published in February this year. For further details on PR No. 10/2021, please refer to our update here.

PR 49/2021 is focused on foreign investment restrictions on the drinks industry, such as Alcoholic Beverages within Indonesia Standard IndustrialClassification (“KBLI”) 11010, Wine (KBLI 11020), and Alcoholic Beverages Made from Malt (KBLI 11031).

E-commerce involving goods listed under KBLIs 47911 (food and beverages, tobacco, chemicals, pharmacy, cosmetics, and laboratory equipment), 47912 (textile, clothes, footwear and personal equipment) and 47913 (household and kitchen equipment), is now also closed to foreign investment, as these items are now allocated to cooperatives and Micro, Small and Medium enterprise (SMEs). Previously, under PR 10/2021, these activities were not listed, which meant they were, in principle, open to foreign investment.

Also covered in the update are courier activities (KBLI 53101), previously unlisted, but now limited to 49% foreign shareholding. However, postal activities (KBLI 53100), previously limited to maximum 49% foreign shareholding, is now removed from PR 49/2021.

The following changes listed in Attachments I, II and III of PR 49/2021 are also relevant:

  1. Instead of the 46 business fields listed previously, 37 are now subject to specific requirements, classified as those:
    1. open to FDI but subject to maximum foreign shareholding;
    2. open to FDI but subject to special approval from the sectoral ministry concerned;
    3. 100% reserved for domestic investors;
    4. certain business fields that are limited, supervised or regulated by a separate regulation on supervision and control of alcohol beverages. This is an additional classification under PR 49/2021, which includes wholesale of alcoholic beverages (KBLI 46333), retail of alcoholic beverages (KBLI 47221) and (on-street) vending of alcoholic beverages (KBLI 47826);
  2. Instead of 51 business fields previously, 60 are now reserved for cooperatives and SMEs; and
  3. The Government has increased the number of business fields subject to partnerships from 38 to 46.

ABNR Commentary

By means of PR No. 49/2021, the Government has responded to demands from domestic stakeholders who had raised concern over the February list. In particular, the opening up of alcoholic beverage production to foreign investment raised strong opposition from religious groups. These demands appear to have been met in PR 49/2021, and the list is likely to remain in effect for the next few years.

It should be noted, however, that in practice, the list itself was not a definitive indication of what was permissible: Even if a particular KBLI was unlisted, it did not necessarily follow that the business activity it represented was automatically 100% open to foreign investment. Sectoral legislation may result in additional restrictions: We understand that some ministries are currently working on new regulations that may create new hurdles for foreign investment, potentially in contradiction to the new investment list.

Consequently, the safest advice is always to check with the Investment Coordinating Board (BKPM), which was recently elevated to ministry status (with cabinet-level responsibility for investment), before making investment decisions of significance.

By partner Ms. Elsie F. Hakim (ehakim@abnrlaw.com), foreign counsel Mr. Gustaaf Reerink (greerink@abnrlaw.com), and senior associate Ms. Yohanna Fifinella (yfifinella@abnrlaw.com).

This ABNRNewsand its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.