Foreign Investment: the New Deal

Indonesian officials have proposed opening up more businesses to foreign investors, including operating the country’s airports, as part of promised measures to give a lift to the slowing economy.

In August, the government said it would amend a “negative investment list” of sectors in which foreign investors areeither barred or restricted. The list, which has existed for decades, limits foreign involvement in areas deemed sensitive.

Proposed changes in the limit were released on Wednesday by chief economic minister Hatta Rajasa and the head of Indonesia’s investment board, Mahendra Siregar.

The proposals need the approval of President Susilo Bambang Yudhoyono.

Indonesia, which has been hurt by a depreciating currency and high current account deficit, reported on Wednesday that the economy had annual growth of 5.62 percent in the third quarter, the weakest pace in nearly four years.

According to a summary of the proposals, foreign investors will be allowed to fully operate airports, ports and airport services through a public-private partnership programme.  No details were given about how the programme would work.

The proposals also raise the ceiling of foreign ownership for such industries as pharmaceuticals and telecommunications.

However, no changes were proposed for limits on investment in the alcoholic drinks industry, which officials had earlier said would be freed up. No reason was given but the issue could turn sensitive in the mostly Muslim country ahead of next year’s parliamentary and presidential elections.

The following are other proposals for increased foreign investment:

– pharmaceuticals (increased to 85 percent from 75 percent)

– joint-venture financing companies (increased 85 percent from 80 percent)

– telecommunications, both cellular and fixed line (increased to 65 percent from 45 percent)

– tourism, including in the forestry sector (increased to 70 percent from 49 percent)

– bus terminals (up to 49 percent ownership)

– advertising (up to 51 percent, for firms from Southeast Asia)

– film distribution (up to 49 percent)

– vehicle testing (up to 49 percent)

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