BKPM Affirms Not All Foreign Investment Can Enter Indonesia

The Acting Deputy for Investment Climate Development at BKPM, Yuliot, has stated that not all foreign investment can directly enter Indonesia. The agency will screen investments and the types of businesses open to foreign investors, in accordance with Presidential Regulation (Perpres) No. 44/2016. Yuliot explained that the regulation governs 515 business fields that are either closed or open with conditions. This rule makes Indonesia a very restrictive country towards foreign investment. Compared to other nations, this number is very high. Singapore only regulates 4 business fields, Malaysia around 30, Thailand 44, while Vietnam imposes no restrictions at all. “So, if we look at it from the restrictive side, we are very restrictive,” he said during a meeting at the Kadin Tower, Jakarta, on Wednesday (7/8). Yuliot acknowledged that these limitations severely constrain the room for manoeuvre for business actors and investors in Indonesia, especially when businesses require substantial capital that only foreign investors are willing to provide. “For example, the Nyonya Meneer case some time ago. They had already found a prospective investor from abroad, but because of these restrictions, the deal could not proceed. The investor pulled out. Eventually, Nyonya Meneer collapsed and shut down completely,” he said. Nevertheless, he stated that these investment restrictions can protect certain business fields from being dominated by foreign entities. Previously, the Head of the Institute for Economic Studies, Research and Development (LP3E) at Kadin Indonesia, Didik J Rachbini, stated that foreign direct investment granted to decacorn and unicorn companies would impact the strengthening of the Rupiah. This is because the inflow of foreign funds increases the supply of US dollars in the country. Didik noted that while this benefits the Rupiah’s strength, there is a downside for Indonesia’s Current Account Deficit (CAD), as the investment generally returns to the investor’s home country in the form of dividends from profits.