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Thu, 03 Nov 2016

BKPM/Retail Business Grows as Foreign Investor Activity Increases

Foreign investors are heavily investing in the retail sector. BKPM fully supports the growth of investment in the sector based on the revision of the Negative Investment List (DNI) in 2016. This revision is expected to increase the number of foreign investments entering the country. According to a report from the Global Retail Development Index (GRDI) 2016, Indonesia is ranked 5th based on its potential to grow within the retail business sector. Whereas in previous years, according to a survey conducted by the global consulting firm, A.T. Kearney, Indonesia was only ranked in 12th place. Through the GRDI index, the company measured the level of investment, potentiality and traction of retail businesses in thirty countries around the world including Indonesia.

Some of the most important variables in the survey were the market segment, the level of risks, market penetration and the average growth of retail in the country. With Indonesia being in 5th place, it can be said that Indonesia has a positive ranking based on these variables. Some research found by the Indonesian media even indicates that the growth in the retail sector will continue to improve and increase until the end of the year. It is known that a few foreign retailers such as Lawson, IKEA, Lotte and much more intent on increasing their investment in Indonesia.

Reports from GRDI show that US$324 million has been reached from retail businesses in Indonesia. This has been the highest figure recorded by the GRDI since 2001. According to the President Director of A.T. Kearney Indonesia, John Kurtz, there are a few factors that contribute to the increment of investment and willingness of foreign investors to invest in Indonesia. These factors include Indonesia’s large population plus the growing number of the middle class. Additionally, the changes of calculation pattern by the GRDI has helped to formulate the real amount of retails sales in Indonesia. In contrast to last year, all reports calculated this year, include all types of retail stores, e-commerce and even traditional retailers are included.

BKPM wants to utilize this thriving timing to grow retail businesses in Indonesia through the proposed revisions of DNI which announced by BKPM in February 2016. This shows that the government wants to open up business opportunities for foreign investors particularly in regards to foreign business opportunities in the retail business sector. The proposed revision of DNI also states that department stores with an area of less than 2000 m2 can be supported through foreign capital by up to 67%. Next, for supermarkets with an area below 1200 m2 and mini markets below 400 m2, foreign investors can invest up to 33%. For the e-commerce sector, it is proposed that foreign investors are allowed to invest the full 100%.

An interesting point was brought up due to the development of the revision. Through the Presidential Regulation No. 44 on May 12th 2016, President JokoWidodo confirmed the approval of DNI 2016 that allowed foreign investors to invest up to 49% in the e-commerce sector. This shows that even though the government wishes to boost foreign investment in Indonesia, at the same time, they understand the importance of protecting domestic businesses. Through the revisions of DNI, it is expected to help increase foreign investors without harming domestic investors.