The government will immediately revise presidential regulation no. 44 of 2016 concerning Indonesia's negative investment list - Photo by Coordinating Economic Ministry

JAKARTA (TheInsiderStories) – The government will immediately revise presidential regulation no. 44 of 2016 concerning Indonesia’s negative investment list which broadly aims to reduce current account deficit, improve financial stability, and stimulate growth, the official said today (11/12). In its place, the government will issue a positive investment list.

Coordinating Economic Minister Airlangga Hartarto said the positive investment list will later be issued in the form of presidential regulation that replaces the negative list policy. The government targets the regulation to be completed and ready to be published in January 2020.

The new policies will focus on restraining imports and expanding exports as well as boosting foreign investments in the country. As such, the measures will include tax incentives to attract foreign direct investment (FDI) and the opening up of several market sectors to foreign investment.

“So we only forbid what is indeed prohibited based on international conventions or related to the national interest. For example, the chemical weapons industry, or industries that process mercury. The others will be opened and the government will issue a positive list,” Hartarto said in a media briefing at his office.

The priority industry for the government which will be included in the positive investment list, the minister said, is the industry that can substitute Indonesia’s import needs so far. In addition, industries that have been included in the tax holiday recipient list such as the coal industry that has a coal gasification program is included in government priorities and are open for investment.

Meanwhile, an investment list that is open with “certain conditions” will also still exist. It includes investment conditions with the obligation to cooperate with micro, small and medium enterprises with certain capital provisions, Hartarto said.

Revising the negative investment list has been widely seen as an important step in attracting more foreign investment in Indonesia and stimulating the economy. Indeed, the government is planning to mitigate the slowing trend in economic growth, and foreign direct investment in particular, by kick-starting reforms and improving procedures for investment.

The government has actually planned to relax the negative list policy since 2018. The process of spending a number of business sectors is listed in the 16th Economic Policy Package. However, the revision process is stuck. The sequel has only begun to be discussed later in line with the government’s plan to encourage investment by publishing the Omnibus Law Cipta Karya.

President Joko Widodo previously has vowed a renewed push for structural reform in Southeast Asia’s largest economy, where tepid investment has contributed to keeping the growth rate at around 5 percent in recent years.

In 2016, Widodo shortened the negative list in what he dubbed a “Big Bang” shake-up of restrictions, opening sectors ranging from retail to telecommunication. 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 gross domestic product.

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: lexy@theinsiderstories.com