JAKARTA May 14 Indonesia's new
foreign-investment rules, rather than attract new investors,
could deter them from entering energy, agriculture, retail,
storage and other sectors, business lobby groups and some
company executives say.
Last August, at a time when the rupiah was tumbling
and there were serious concerns about Indonesia's economy, the
government announced that it would change investment rules in a
bid to attract more foreigners.
It took nearly nine months for the government's revisions of
what's called the "negative investment list" - which lists
restricted sectors - to be published. Since the Investment
Coordinating Board published the changes last week, the response
has largely been negative.
"On balance, the revised negative investment list is a cold
shower for investors," said Andrew White, managing director of
American Chamber of Commerce in Indonesia.
An executive of another foreign chamber said it also opposed
the new changes, though he expressed doubt engaging officials
about them could help as the government of President Susilo
Bambang Yudhoyono will be out of office in October.
Indonesians will vote for a new president on July 9.
Yudhoyono, who cannot seek a third five-year term, said the
revisions to the decades-old negative investment list would
attract overseas investors, as it opened up pharmaceuticals and
advertising to more foreign involvement.
But the 104-page document also introduced limits for new
foreign investment in oil services, storage, retail trade,
horticulture and small power plants.
"For new players who want to come in to Indonesia and set up
a brand new venture, it makes things a little bit more
complicated," said an official at a major commodities firm who
was not authorized to speak to the media.
For the first time, Indonesia has restricted foreign
ownership of warehousing and cold storage, limiting investment
to 33 percent. The move could hinder expansion by agriculture
importers or traders with an existing Indonesian footprint, such
as U.S. giant Cargill, Singapore's Olam International
and global commodities trader Louis Dreyfus
"This ownership limitation means that to invest in the
sector, all foreign companies have to partner or collaborate
with local investors," Jimmy Bella, a domestic trade official at
the Trade Ministry said about the distribution and warehouse
NATIONALISM A FACTOR
The government also barred new foreign investment in retail
stores that sell electronics, footwear, textiles, toys and food,
potentially making it difficult for firms planning to expand
into Indonesia, such as IKEA.
Government officials and domestic industry groups back the
new foreign investment limits, saying they are necessary to
allow Indonesian companies to better compete in their own
"It is important to look at the perspective of
sustainability, growth and participation of the Indonesian
people," Mahendra Siregar, chief of Indonesia's Investment
Coordinating Board, told Reuters.
The next president, who will take office in October, will
need to balance increasing nationalistic policies with the
country's dependence on foreign investment to help fund the
Foreign investment growth in the first quarter slowed to its
lowest level in nearly five years, while the current-account
deficit was 2.06 percent of gross domestic product.
(Additional reporting by Yayat Supriatna; Editing by Richard