JAKARTA (TheInsiderStories) – The Indonesian government will publish a positive investment list in January 2020 to begin promoting priority industries that are open to both foreign and domestic investment, the official said today (11/20). It aims to reduce current account deficit, improve financial stability, and stimulate growth in Southeast Asia’s largest economy.
“The government will issue a positive list in January. This means that if the investment base is still a negative list, now we will change in the omnibus law there are only 6 negative list sectors. The rest are positive lists that are open to foreign and domestic investors,” Coordinating Economic Minister Airlangga Hartarto told reporters.
The negative investment list bans or limits foreign investment in certain business sectors to protect local firms against foreign competition. Hartarto said a full investment ban would only apply to selected business sectors, including gambling, cannabis cultivation, chemical weapons, and wildlife trade.
For businesses outside of the selected sectors, the government would instead draw up a priority list for them to welcome more investment
“We will draft a presidential regulation on the priority list, or the positive investment list, particularly for industries that are import-substitution or export-oriented,” the minister said.
President Joko Widodo’s administration has struggled to attract more investment into the country amid sluggish economic growth. Indonesia’s GDP expanded 5.02 percent in the third quarter, the slowest pace in more than two years.
The growth of investment, which accounts for about a third of the country’s GDP, plunged to 4.21 percent from 6.96 percent recorded in the same period last year, Statistics Indonesia data show.
Hartarto said several sectors that could strengthen Indonesia’s value-added chains were proposed to be included in the priority list, including the coal gasification, automotive and electronics sectors.
The upcoming issuance of the priority industry list will mark a change in the government’s negative list policy. It previously aimed to liberalize some business sectors to welcome more investment as part of its 16th economic policy package, issued in November last year.
In the previous plan to revise the negative list, the government proposed opening up 49 business sectors by allowing foreign owners to have greater stakes or by abolishing the requirement of having to obtain ministry recommendations.
Revising the negative investment list has been widely seen as an important step in attracting more foreign direct investment (FDI) in Indonesia and stimulating the economy. Indeed, the government is planning to mitigate the slowing trend in economic growth, and FDI in particular, by kick-starting reforms and improving procedures for investment.
Months ago, Widodo pledged to go all-out to boost the economy, including by revising the negative list to improve the investment climate, loosening restrictive labor laws and cutting corporate tax rates.
The FDI excluding oil and gas as well as banking, was US$29.3 billion in 2018, down from $32.2 billion a year earlier, the country’s investment board data showed. While the realization investment in the nine-month of 2019 just $28.26 billion, around 75 percent of this year’s target.
Indonesia needs FDI to narrow its growing current-account deficit (CAD), which is now at its biggest since the second quarter of 2014. Indonesia’s CAD widened to $7.7 billion in the third quarter of 2019 from $8.2 billion gaps a year earlier, equivalent to 2.7 percent of the country’s GDP.
In the past, Indonesia’s FDI has mostly been in resource-related and consumer sectors, but recently the tech sector has been attracting large investments. According to Alphabet Inc’s Google and Singapore state investor Temasek Holdings Ltd., Indonesia’s internet economy is the region’s largest and fastest-growing, worth $27 billion last year and forecast to hit $100 billion by 2025.
Written by Lexy Nantu, Email: email@example.com