Indonesian businesses want foreign investment cap
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Business groups have demanded that the government prioritise local interests when it revises the negative investment list (DNI) of Indonesian companies.
In revising the list, the government plans to open six out of 20 sectors that are currently closed to foreign investment.
It also plans to raise the percentage of foreign ownership in a wide array of sectors, including logistics, pharmacies and the tyre industry. This has met with objections from local business associations.
Indonesia Logistics and Forwarders Association (ALFI) executive director Theo Kumaat said he hoped the government would retain foreign ownership at 49 per cent, not more.
The current rule helps local business players develop in line with the government’s commitment to empowering the national logistics system (Sislognas).
“We hope logistics services that most local firms can handle, such as warehousing, will be given to domestic players,” Theo told the Jakarta Post on Monday.
“Foreign investment should focus more on capital-intensive, technology-intensive and labour intensive business,” he said.
According to him, business players from Southeast Asia can be exempted from this regulation considering Indonesia’s participation in the regional pact on liberalising logistics services.
Under the Asean Framework Agreement on Services, Indonesia should gradually open its logistics services sector to regional players starting this year by allowing a maximum 70 per cent foreign ownership in logistics firms.
However, the commitment has yet to come into force, as the technical regulation to implement it is still under deliberation.
Indonesian Pharmaceutical Association (GP Farmasi) advisory board chairman Anthony Charles Sunarjo echoed Theo’s concerns, saying that the government should maintain majority local ownership in pharmaceutical firms producing generic medicines.
Currently, foreign drug-makers can only acquire a 25 per cent stake in domestic firms, leaving the majority share open for local players. Local pharmaceutical firms currently control 80 per cent of the overall domestic generic medicine market.
Meanwhile, Indonesian Tyre Producer Association (APBI) chairman Aziz Pane also raised concerns over further opening of the domestic crumb-rubber industry. He said the industry should be closed for new investment from both domestic and foreign investors, but this policy could be reviewed once the supply of raw material already exceeded the installed capacity of the industry.
“At present, existing producers are struggling because the raw material supply cannot meet the demand of new crumb-rubber plants. An increase of plants will add to existing idle capacity,” he said.
