Door widened for foreign investment<\/p>\n
JAKARTA (JP): The Indonesian government has significantly
\neased restrictions on foreign investors, freeing them from the
\nminimum capital requirements and ending compulsory equity
\ndivestment for joint ventures.<\/p>\n
The new regulations also include a dramatic opening of
\nseaports, telecommunications, power, railways, civil aviation,
\nnuclear power and the mass media to foreign ownership. The
\nstrategic nature of these industries was previously given as a
\nreason to exclude foreign involvement.<\/p>\n
Government Regulation No.20\/1994 dated May 19, which was
\nannounced yesterday, reduces the minimum equity holding for the
\nIndonesian partner in a joint venture from 20 to five percent and
\nremoves the compulsory divestment previously imposed on t foreign
\npartners.<\/p>\n
However, wholly-owned foreign companies are still required to
\nmake divest starting in their 15th year, but without any
\npercentage of shares to be divested yet specified.<\/p>\n
New investment<\/p>\n
\"We need Rp 660 trillion (US$305 billion) in new investment
\nduring the current five year plan and 73 percent of the total is
\nexpected from private investment, including foreign capital,\"
\nState Secretary\/ Minister Moerdiono said yesterday when he
\nannounced the regulation.<\/p>\n
Industry Minister Tunky Ariwibowo and Minister for Investment
\nDevelopment Sanyoto Sastrowardoyo who accompanied Moerdiono said
\nthe new policy is designed to make Indonesia more attractive to
\nforeign investors.<\/p>\n
\"We are now facing keener competition from such countries as
\nChina, Vietnam, India and other Asian countries in attracting
\nforeign investments,\" Tunky pointed out.<\/p>\n
Foreign investors have often complained about the severe
\nrestrictions here, notably those related to minimum
\ncapitalization, compulsory divestment and restricted areas of
\noperation.<\/p>\n
Foreign investment commitments in the country declined
\nmarkedly last year due apparently to capital turning to \"greener
\npastures\" in other Asian countries.<\/p>\n
Prediction<\/p>\n
Informed business sources predicted last week that the
\ngovernment would issue a new package of deregulation soon. The
\nreform announced yesterday though, only addressed foreign
\ninvestment.<\/p>\n
\"We need to create a lot of jobs to accommodate the estimated
\n2.5 million new entrants to the labor market,\" Tunky added in
\nemphasizing the urgent need to revitalize foreign investment.<\/p>\n
Government Regulation No.50\/1993, which was revoked by the new
\nruling, required foreign investors to gradually reduce their
\nshareholdings to 51 percent after the 20th year of business and
\nimposed a minimum capital investment of $250,000 and a minimum
\nIndonesian shareholding of 20 percent at the start of the
\nventure.<\/p>\n
Government Regulation No.20\/1994 lets both partners decide by
\nthemselves any changes in the composition of their share-
\nownership.<\/p>\n
The new ruling also allows the investors to decide by
\nthemselves the size of their capital outlays based on the
\ncommercial viability of their projects.<\/p>\n
The new regulation allows wholly-owned foreign companies to
\noperate anywhere in the country. This is different from the old
\nruling that restricted their operations in remote areas, notably
\nthose in the eastern part of the country.<\/p>\n
30-year license<\/p>\n
The new regulation specifically sets the validity of foreign
\ninvestment licenses at 30 years.<\/p>\n
The license can be extended for another 30 years by the
\nminister for investment development as long as the company still
\nexists and remains a positive contributor to the economy and the
\ncountry's development as a whole.<\/p>\n
Foreign companies, be they joint ventures or wholly-owned
\nforeign enterprises, are allowed by the new regulation to set up
\nnew ventures and to acquire other foreign firms and domestic
\ncompanies as long as the acquired firms are not in an industry
\nclosed to foreign investment.<\/p>\n
The government will allow existing foreign companies to adjust
\nthemselves to the new provisions. (vin)<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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