Investors confused by govt's new restrictions

Andi Haswidi, The Jakarta Post, Jakarta

Confused by the new negative investment list issued recently by the government, the Indonesian Chamber of Commerce and Industry (Kadin), together with associations representing foreign investors, plans to go to the government to seek explanations.

"We have identified so many gray areas in the list. We have been afforded the opportunity to question the government about these in greater detail on July 16," Kadin chairman Muhammad S. Hidayat said while addressing members of foreign business associations at Kadin headquarters Wednesday.

He was speaking during a meeting convened to draw up an inventory of arguments and questions with a view to seeking a review of the negative list. These arguments and questions will be handed over to the government as a formal statement.

Earlier in the day, Kadin also held a meeting with its members.

Having heard the views of chamber members, including foreign ones, Hidayat said that the list had given rise to widespread confusion among investors.

This was partly the result of unclear criteria, such as those on ownership restrictions, lack of clarity as regards the philosophical standpoint underpinning the list, and the use of confusing terminology.

"Besides the confusion, many of the foreign investors also have a negative perception of the list, saying that it is even more restrictive than the previous one," Hidayat said.

During the meeting, too many questions and complaints were raised to be discussed in detail. As a result, it was decided to concentrate on those issues that would be specifically raised during the meeting with Coordinating Minister for the Economy Boediono.

Some of the questions raised concerned uncertainty over whether foreign firms would be forced to sell stakes when renewing their licenses as a result of the changes to foreign-ownership restrictions in many sectors, such as the 49 percent restriction on foreign ownership in the telecoms industry.

A similar concern was also raised by a representative of the pharmaceutical industry, who pointed out that the industry was currently undergoing a process of consolidation around the globe.

"An acquisition outside the country could affect share ownership here. The question is whether our regulations are compatible with that?" he said.

There was also confusion about the terminology used in the list.

Some queried the definition of "major pharmaceutical firm" as no explanation was given of what the term "major" actually meant. Also, investors wanted to know how the term "SME" was defined, as businesses in some sectors would be required to enter into partnerships with small businesses.

Also present at the meeting was Muhammad Ikhsan, a special advisor to the coordinating minister for the economy, who said the list was the best the government could do right now, but that it was open to change and review.

"The list isn't 100 percent clear as the government is still preparing the ancillary regulations, which will provide more detail," he explained.

Under the list, those sectors that be opened up wider to foreign investment include hospital services with up to 65 percent foreign share ownership permitted, nursing and health support services with 49 percent, travel agency services with 50 percent and plantations with up to 95 percent.
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