Indonesia will ease foreign ownership restrictions in airport and power projects to lure capital as the nation grapples with a current-account deficit that’s sending the rupiah to its worst yearly drop since 2000.
Foreigners may own as much as 49 percent of airports and 100 percent of power plants built under public-private partnerships, the investment coordinating board said in a statement in Jakarta. The government will simplify processes to boost investment after completing talks today on its revised negative-investment list, which limits overseas ownership in some industries, Coordinating Minister for Economic Affairs Hatta Rajasa told reporters.
“Over the long run this is positive,” Destry Damayanti, chief economist at PT Bank Mandiri in Jakarta, said after the announcement. “In the short-term the impact won’t be significant on investment as investors adopt a wait-and-see stance regarding the global economy.”
Indonesia’s persistent current-account deficit has dragged the rupiah to a five-year low, as the impending reduction of monetary stimulus by the U.S. Federal Reserve next month raises the risk of outflows from emerging markets. The government should continue to shore up its economy to prepare for the tapering, economists at the International Monetary Fund said this month.
Airports and terminals for land transportation were previously closed to foreign companies, said Mahendra Siregar, chairman of the investment coordinating board. Overseas investors may own 100 percent of power plants with capacities of more than 10 megawatt and 95 percent if the plant isn’t built under a public-private partnership project, he said.
The government will ease the foreign-ownership limit in pharmaceutical ventures to 85 percent from 75 percent. It will set a 51 percent cap for advertisement ventures for investors from the Association of Southeast Asian Nations, from no overseas ownership previously, he said.
The rupiah has fallen about 21 percent this year, reaching 12,260 against the U.S. dollar on Dec. 23, the weakest level since December 2008. Southeast Asia’s largest economy had a record current-account deficit of 4.4 percent of gross domestic product in the second quarter and the gap in the broadest measure of trade narrowed to 3.8 percent in the following three-month period.