Mon, 19 Oct 2015

The Indonesia Investment Coordinating Board (BKPM) had initiated a public discussion to revise the Negative Investment List (DNI) Friday last week. This measure is BKPM’s response to recent development in the business sector aimed at attracting more foreign investors. This plan, as explained by BKPM will be realized by revising existing DNI in the course of six months. Such plan is applauded as strategically wise, as the ASEAN Economic Community (AEC) will begin in 2016.

Head of BKPM Franky Sibarani asserted that business sectors are growing rapidly due to businesses creativity, where many new business sectors are emerging, including the unexpected ones. Mr. Sibarani emphasized that BKPM is still coordinating with various stakeholders.

“Currently, we are at the deliberation stage, which means BKPM is yet to decide which one will be allowed and prohibited. However, coordinating certain sectors does require some regulatory framework,” said Mr. Sibarani in a press conference held last Friday, 16 October 2015 at BKPM office.

Mr. Sibarani also revealed several business sectors that is planned to be regulated under the new DNI such as cemetery services, assisted living (providing accommodations for senior citizens), and application-based businesses.

Cemetery services, according to Mr. Sibarani, has never been regulated under DNI, as it is a new but closed-business which cannot be easily accessed, especially for foreign investors. It is hoped that the sector in question can be liberalized to accommodate foreign investments.

Mr. Sibarani further explained about assisted living, which currently is a growing business. He noted that a Japanese investor already show interest to invest USD 40 million, while another investor from Australia is willing to invest USD 26 million in this sector.

The main issue pertaining to this sector is categorization of assisted living as a business. Under the Indonesia Standard Business Classification (Klasifikasi Baku Lapangan Usaha Indonesia - KLBI), this sector is categorized as elderly hostels/nursing home supervised by the Ministry of Social Affairs. Making this sector in question a non-profit activity.

“Meanwhile, investors in the assisted living business would surely expect some form of profit from their investments,” asserted Mr. Sibarani.

Additionally, online businesses and application-based transportation business such as Go-Jek and Uber will also be discussed under the DNI revision. This business remains a major enigma, because application-based ojek (motorcycle taxis) and taxis with black license plate [as opposed to public taxis that use yellow license plate – red.] does not conform with the Traffic and Road Transportation Law.

BKPM also opens the possibility to incorporate businesses that falls under the supervision of more than one institution, in order to clearly clarify the applicable business policy for such sectors. As an example, Mr. Sibarani pointed out the marine animals business that is supervised by both the Ministry of Marine and Fisheries Affairs and the Ministry of Industries under the current DNI.

“The sector is preserved for micro-small-medium businesses on one hand, but are liberalized as long as it partners with national companies on the other hand,” asserted Mr. Sibarani.

Commenting on the DNI revision, banking expert Fauzi Ichsan pointed out that Indonesia still requires a huge amount of foreign investment, considering Indonesia’s current account deficit problem. Inviting foreign investors may be the solution for such problem, while at the same time DNI revision must reflect the national economic needs.

“DNI must put national economic needs at the top of its deliberation list. Do we need foreign investments or not? It is not sensible to turn down foreign investment when we do need one,” asserted Mr. Ichsan. Mr. Ichsan firmly believed that government opening up more to foreign investors is something normal, as the government must formulate investment-friendly regulations and policies.

Conversely, Hikmahanto Juwana, an international law expert, warns all parties to implement prudentiality principle when dealing with DNI, especially in certain sectors such as banking, since total liberalization in this sector can be extremely risky.