Closed Business Sector (Negative Investment List)

Background

One of the government's efforts in improving the flow of investment in Indonesia is by providing flexibility for investors to determine the business sector of investment based on its interest. This triggers a simplification process of rules towards the Priority Scale List to become the Negative Investment List/ Daftar Negatif Investasi (DNI)

DNI is valid for 3 (three) years and an examination is implemented each year adjusted with the needs and developments.

Negative Investment List/ Daftar Negatif Investasi (DNI)

Article 10 paragraph 1 of Regulation of Chairman of BKPM Number 12 of 2009 (“Perka BKPM 12/2009”) stated that all business sectors or business types are opened for investment activity, except business sector or business type that is declared to be closed and opened with conditions. Therefore, investors shall comply with the law and regulations, such as DNI prior to conduct investment activity.

DNI covers list of business sectors that are entirely closed and partially closed for private foreign investment activity or domestic. The last amendment of DNI is contained in the Regulation of President of the Republic of Indonesia Number 36 of 2010 (“Perpres 36/2010”).

Closed Business Sector for Investment

Based on Article 1 (1) Perpres 36/2010, closed business sector is certain business sector that is prohibited to be endeavored as an investment activity. This stipulation is based on the criteria of health, morals, culture, environment, national defense and security, as well as other national interests.

Closed business sectors for investment, as regulated in the Annex I of Perpres 36/2010, among others include the areas of cultivation of marijuana, gambling/casinos, and alcoholic beverage industry.

Furthermore, Article 12 paragraph 2 of Law Number 25 of 2007 (“UU 25/2007”) regulated several business sectors that are prohibited for foreign investment due to the consideration of its important role in the national defense, such as: (i) the production of weapons, ammunition, explosive devices, and war equipment; and (ii) business sector that is explicitly declared to be closed by law.

Opened Business Sector with Conditions for Investment

Based on Article 2 (1) Perpres 36/2010, business sector with conditions is a certain business sector that can be operated in the investment activity with certain conditions, namely business sector that is reserved for micro, Small, Medium, and Cooperative Business, business sector with the condition of partnership, business sector with the condition of capital ownership, business sector with the condition of certain location, and business sector with the condition of special licenses.

The stipulation of opened business sector with the condition for investment is based on the criteria of national interest, namely the protection of natural resources, the protection, and development of micro, Small, Medium Business and Cooperatives, supervision of production and distribution, the enhancement of the capacity of technology, participation of domestic capital, as well as cooperation with business body appointed by the government.

Opened business sector with conditions, as regulated in the Annex II of Perpres 36/2010, covers sectors such as cultivation of staple crops, cultivation of swallow nest in the wild, hatchery of saltwater fish, small-scale power plant, and non-metal goods recycling.

In the case of opened business sector with conditions, in accordance with Article 3 paragraph (1) of Perpres 36/2010, investor shall comply with the location requirements as stipulated in the existing law and regulations in the spatial and environment fields.

Renintha Karina

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