Thu, 01 Apr 2010


By Katrina Nicholas
March 31 (Bloomberg) -- Indonesia will allow foreigners to buy property in the country and own bigger stakes in health-care companies as it completes a review of investment rules, the country’s investment coordination agency said.

Southeast Asia’s largest economy plans to deregulate its property industry by the end of the first half, allowing foreigners to buy homes and commercial real estate directly, Gita Wirjawan, chairman of the Investment Coordination Board of Indonesia, said in a forum in Singapore today. The move will “unleash value,” he said.

“The government is committed to continuously comb through policies to make it easier to invest in Indonesia,” Wirjawan said in an interview after the forum. “I am optimistic that once we can be seen to be taking steps in the right direction, we’ll be able to reach a 15 percent increase in foreign investment over last year’s” $14 billion, he said.

President Susilo Bambang Yudhoyono, who won re-election to a second term last year, has pledged to double spending on roads, seaports and airports to $140 billion over the next five years as he aims to deliver average economic growth of 6.6 percent over the remainder of his term ending 2014. He won the election after pledging to attract investment and generate jobs.

Buying Property

“Property companies that sell apartments will benefit the most, especially those who are currently building,” said Natalia Sutanto, a property analyst at PT Bahana Securities. Sutanto covers at least six Indonesian property companies including PT Ciputra Development, PT Bakrieland Development and PT Lippo Karawaci which all own high-end condominiums. She recommends “buy” for the three companies.

“The prices for secondary apartments have reached maturity and they won’t rise too much, especially because the foreigners will likely enter the middle to upper level apartments due to their budget,” she said in a telephone interview in Jakarta.

The Indonesian government is still working on the details of the regulation and there have been talks that the new rights for foreigners may be limited to high-rise housing purchases with a value above 1.5 billion rupiah ($165,000), Sutanto said. The regulation also may stop short of allowing total ownership of the property and only give foreigners a right to its use for a certain time period, she said.

Education, Logistics

Indonesia has finished reviewing a 2007 presidential decree known as the “negative investment list,” which limits overseas ownership in companies, Wirjawan said. The new rules, which may be released as soon as next week, will include changes in the cap on foreign stakes in industries such as health care, education, logistics and agriculture, he said.

“There is a spirit of liberalization with respect to health care and hospitals, which was closed off to foreign investment in the past,” the investment agency chief said in the interview. Foreign investment in health care will be capped at 67 percent, versus 49 percent for other industries, because “there is a recognition Indonesia needs better health care facilities,” he said.

A draft of the revised investment rules is with President Yudhoyono, Wirjawan said during the forum on Indonesia’s investment climate.

“This has been a long overdue process, and we’ve finally gotten to a point where all the relevant ministers agreed,” he said. “We’ve all signed off and sent it over to the President and it’s waiting on his desk to be signed.”

Credit Ratings

Wirjawan also said he sees no reason why Indonesia’s credit ratings won’t rise to investment grade in the next 18 months.

Standard & Poor’s raised the country’s sovereign credit rating to a 12-year high of BB from BB- on March 12, prompting investors such as Cornel Bruhin at Clariden Leu AG in Zurich to predict more upgrades by rating companies in the coming months. The S&P rating, which has a positive outlook, is two levels below investment grade.

Moody’s Investors Service in September raised Indonesia’s sovereign debt ratings one level to Ba2, the highest level in 11 years. Fitch Ratings on Jan. 25 raised Indonesia’s credit rating to BB+, one level below investment grade.

“Indonesia will continue on its upward trajectory for years to come and with the government’s renewed mandate and commitment to reforms, Indonesia’s ability to remedy its mistakes will continue to improve,” Wirjawan said.

He expects investment to come from Indonesia’s neighbors, and the country will also target “new frontiers” including the Middle East, China and India, he said.

“Those are the guys that are hungry for investments in Indonesia,” he said. “The English, the Europeans and the Americans, those are the toughest bunch because of what they’ve gone through in the last 15 months and they see Indonesia as a basket case. It’s off their radar.”