Indonesia Allows Greater Foreign Stakes in Roads to Cinemas

  • Govt allows 100% foreign stakes in cold storage, restaurants
  • Revised list aimed at creating jobs, improving competitiveness

Indonesian President Joko Widodo will allow full foreign ownership in businesses from toll roads to cinemas, as he seeks to attract investment and create jobs after cutbacks by Ford Motor Co. and Toshiba Corp.

The government will also let non-Indonesians hold 100 percent stakes in industries including cold storage, pharmaceutical raw material manufacturing, and restaurants, Coordinating Minister for Economic Affairs Darmin Nasution said in Jakarta on Thursday. The maximum foreign-investment limit in golf courses, health support services and airport support will be raised to 67 percent, he said.

“This is the first round, there will be a second and a third,” Widodo said in a Bloomberg TV interview on Thursday, adding that the rules will be changed in 49 sectors including in the retail industry, fisheries and the digital economy. “We will see the results of each step,” he said, after inspecting a fish farm in Sumatra.

Indonesia wants to lure more foreign capital to offset weaker export performance and provide more jobs to drive annual economic growth from a six-year low. While total investment from overseas rose in 2015, capital placement in labor-intensive industries slid 12 percent amid increases in the minimum wage. Ford shuttered local operations in late January, while Toshiba, Panasonic Corp. and Chevron Corp. have announced job cuts.

Labor Market

“With this revised investment guidance list, our aim is to open a wider labor market while strengthening our pool of capital,” Cabinet Secretary Pramono Anung said from the presidential palace in Jakarta. “We need to anticipate the inevitable time when we join the Asean economic community, so we must improve our competitiveness.”

The government will head toward simplifying overseas investment limits to three levels: 49 percent, 67 percent and 100 percent, Anung said. This means foreigners may own 67 percent of private museums and catering services, from 51 percent previously, or hold entire stakes in toll road operations, from 95 percent previously.

The regulation is set to be signed in the next one or two weeks, Nasution said.

Local Movies

The government is also closing 19 industries to foreign stakes, including coral reef harvesting for construction materials and plantations of less than 25 hectares, Nasution said. While it’s allowing foreigners to wholly own cinemas, the companies will be required to show local movies for 60 percent of their total show hours, said Investment Coordinating Board Chairman Franky Sibarani.

Foreign-direct investment increased 3 percent in 2015 to $29.3 billion. That boosted the total that includes domestic funding to 545.4 trillion rupiah, which exceeded the official target. The government is optimistic it can achieve its 594.8 trillion rupiah goal this year as it seeks to cut red tape, Sibarani said.

“Indonesia has hardly flung the doors wide open to foreign direct investment,” Glenn Maguire, chief economist for Asia-Pacific at Australia & New Zealand Banking Group Ltd. said in a report. “They have clearly opened, but one or two gatekeepers have been added.”

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