Indonesia May Open E-Commerce, Movies to Foreigners by 2016

Indonesia plans to complete a review of its investment regime by the middle of next year, aimed at granting greater foreign ownership in industries ranging from e-commerce to luxury retirement homes.

The Indonesia Investment Coordinating Board has asked ministries and international chambers of commerce to suggest revisions to its ‘negative investment list’, a lengthy document that regulates the extent of foreign ownership across the economy, said Azhar Lubis, deputy chairman for investment supervision at the agency. Films, along with other ‘creative industries’ and horticulture are being considered in a “far reaching review”, he said on Friday.

“We want things to be more open, this is the idea,” Lubis said in an interview at his office in central Jakarta. “This is from the president himself.”

The changes are part of efforts by President Joko Widodo to stimulate an economy growing at its slowest pace in six years. Foreign direct investment in July through September was unchanged from the previous quarter and down from a year earlier in dollar terms, data showed on Thursday.

Widodo, known as Jokowi, met a Danish delegation this week including A.P. Moeller-Maersk and Lego A/S, and is heading to the U.S. next week. He will meet with executives of U.S. companies including Google Inc., Apple Inc. and Microsoft Corp., and sign agreements in the energy and maritime sectors.

Law Changes

Significant areas of the Indonesian economy, including telecommunications and banking, are currently partially or wholly closed to foreign investors, either to protect local interests or because of domestic political sensitivities. Red tape, corruption and poor law enforcement are also deterrents to investors.

Indonesia last changed the negative list in 2014, a process Lubis said took two years. The list can be changed by presidential decree, but liberalization of some industries will require a change in the law, a lengthier and more difficult process that’s complicated by Jokowi’s ruling coalition not having a majority in parliament.

“How far they could really materialize this depends on the cooperation between the different ministries, which will implement the changes,” said Shanti Shamdasani, president of ASEAN International Advocacy, an economic and trade consultancy.

Lubis said Japanese investors had expressed interest in building high-end retirement communities for foreigners, and this was currently difficult because of a lack of regulation. Foreign stakes in horticultural industries are currently limited to 30 percent by law, and Lubis said the government could table a bill in parliament next year to change this.

“We need more and better quality vegetables and fruits,” Lubis said. “For that, we need capital and technology, and that means collaboration between foreign and domestic players. If they only have 30 percent, how can they come? At least they need a simple majority.”

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