In early 2021, the Indonesian government introduced a new investment list called the Priority Investment List to replace the Negative Investment List previously established under Presidential Regulation No. 44 of 2016 and Presidential Regulation No. 76 of 2007. This change is contained in Presidential Regulation No. 10 of 2021 on Investment Business Activities as the implementing regulations for the Omnibus Law (Law No. 11 of 2020). The Priority Investment List aims to simplify the sectors that are permitted and restricted for foreign investors, making it easier for them to invest in Indonesia and meet the necessary requirements. This is seen as a crucial step in increasing foreign investment and boosting economic growth in Indonesia. Rather than navigating a lengthy list of businesses that foreign investors cannot invest in, they can now focus on their desired industries and meet the necessary requirements.
The Priority Investment List has significantly reduced the number of business sectors that were previously restricted and now are 100% permitted for foreign investment in many areas. While the Negative Investment List had 350 conditionally open business fields, the Priority Investment List has narrowed it down to only 46 business fields. We will discuss some of the lifted investment restrictions in specific sectors below to demonstrate the advancements brought by the Priority Investment List.
| No. | Sector | The previous status on the Negative Investment List | The current status on the Priority Investment List |
| 1. | Telecommunications and information technology i.e., internet service providers, fixed telecommunication network providers, and mobile telecommunication network providers. | Foreign investment was capped at 67%. | 100% open. In addition, the e-commerce/web portals business (even if the investment is less than IDR 100 billion) is now open to 100% foreign investment, from previously 49%. |
| 2. | Health i.e., investment in hospitals, wholesale of pharmaceutical raw materials, healthcare equipment distribution, main clinics with specialists, and pharmaceutical products for humans (finished drug manufacturing). | Closed for investment or capped to a certain percentage only. | 100% open. Investment in a company engaged in pharmaceutical products for humans is also entitled to tax allowance. |
| 3. | Energy and mineral resources i.e., investment in oil and gas construction (platform), onshore and offshore oil and gas drilling services, electricity installation, maintenance and operation, and electricity generation of below 10 MW. | The investment was capped at a certain percentage. | 100% open. |
| 4. | Construction implementation services or construction consultancy services, either involving high technology or involving high risk. | Foreign investment was capped at 67%, or 70% if the investor is from an ASEAN country. | 100% open. |
| 5. | Trading i.e., distribution that is not affiliated with the production. | Foreign investment was capped at 67%. | 100% open. |
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The Priority Investment List categorizes business sectors into two broad categories i.e., those that are open for investment and those that are closed. The closed business sectors are further divided into two sub-categories: those that are completely off-limits for investment and those that can only be operated by the central government.
The Omnibus Law lists businesses that are completely off-limits for investment, as follows:
- cultivation and industry of class I narcotics;
- chemical weapons manufacturing industry;
- all forms of gambling and/or casino activities;
- industrial chemical and ozone-depleting substances industries;
- the capture of any fish species as listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); and
- the utilization and collection of coral from nature for building materials/limestone/calcium, aquarium and souvenirs/jewelry, and live and dead coral (new dead coral from nature).
Businesses that are reserved for the central government are typically service-based or related to defense and security, which are strategic in nature and cannot be carried out or collaborated with other parties. It is also important to note that some of the KBLI codes on the Priority Investment List do not match those in the KBLI 2020, and instead refer to the KBLI 2017. In addition, there are also codes on the Priority Investment List that are not listed in either the KBLI 2017 or the KBLI 2020. In such cases, investors should seek clarification from BKPM before proceeding with their investment. Investors should also be aware that existing laws and regulations relevant to their investment will remain in force as long as they do not conflict with the Omnibus Law and the Priority Investment List.
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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.
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