Government set to bring changes to the Indonesian negative investment list

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The government is planning to change course in its revision of a regulation on the negative investment list (DNI), saying that it will instead begin promoting priority industries that are open to both foreign and domestic investment.

The DNI bans or limits foreign investment in certain business sectors to protect local firms against foreign competition.

Coordinating Economic Minister Airlangga Hartarto said a full investment ban would only apply to selected business sectors, including gambling, cannabis cultivation, chemical weapons and wildlife trade.

For businesses outside of the selected sectors, the government would instead draw up a priority list for them to welcome more investment

“We will draft a presidential regulation [Perpres] on the priority list, or the positive [investment] list, particularly [for industries that] are import-substitution or export-oriented,” Airlangga said at the Presidential Office on Monday.

The government, he went to say, expected to issue the Perpres amendment next year.

President Joko “Jokowi” Widodo’s administration has struggled to attract more investment into the country amid sluggish economic growth. Indonesia’s GDP expanded 5.02 percent in the third quarter, the slowest pace in more than two years.

Indonesian negative investment list
Indonesia’s GDP growth during Jokowi’s presidency


The growth of investment, which accounts for about a third of the country’s GDP, plunged to 4.21 percent from 6.96 percent recorded in the same period last year, Statistics Indonesia data show.

Airlangga said several sectors that could strengthen Indonesia’s value added chains were proposed to be included in the priority list, including the coal gasification, automotive and electronic sectors.

The upcoming issuance of the priority industry list will mark a change in the government’s DNI policy. It previously aimed to liberalize some business sectors to welcome more investment as part of its 16th economic policy package, issued in November last year.

In the previous plan to revise the DNI, the government proposed opening up 49 business sectors by allowing foreign owners to have greater stakes or by abolishing the requirement of having to obtain ministry recommendations.

Center of Reform on Economics (CORE) Indonesia executive director Mohammad Faisal welcomed the government’s latest move, saying the issuance of a positive investment list would signal to foreign investors that the government would like to see more investment in certain sectors.

He, however, urged the government to draw up a more detailed plan for business sectors that fell in the grey area as a result of not being included in either the DNI or the positive investment list.

“I understand that the government is very concerned about removing barriers for investment, but it’s not only about the investment [that enters Indonesia] but also its impact on the domestic [economy],” Faisal said.

Upholding the policy by making sure it would be integrated with numerous incentives offered by the government such as the tax holiday was a key factor that would support the success of the positive investment list in developing the priority industries, Faisal added.



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