Larger Share of Foreign Ownership in Indonesia's Infrastructure Projects
27 Dec 2013
The Indonesian government wants to enlarge the role of foreign participation in the country's infrastructure development. Through a proposed revision of Presidential Regulation No 36/2010 regarding the Negative Investment List (Daftar Negatif Investasi), foreign investors will have more room for investing in Indonesia's infrastructure sector within public-private partnership schemes (PPP projects). The Indonesian government needs more foreign participation as the current state of the country's infrastructure is inadequate.
Head of the Indonesia Investment Coordinating Board (BKPM), Mahendra Siregar, stated that foreign investors will have the opportunity to obtain a license to engage in government projects in three more sub-sectors of infrastructure: transportation, drinking water, as well as electricity generation (including both the transmission and distribution of electricity).
If the new revision is approved, then foreigners can have a 95 percent stake in PPP projects connected to the construction of port facilities (docks, container terminals, and more). When foreign investors engage in these projects without a PPP structure, the foreign stake is limited to 49 percent. For airport facilities, foreigners can only have a 49 percent stake (both in private projects and PPP projects). Lastly, in toll road development and public works foreigners can have a 95 percen stake (both in private and PPP projects).
For electricity generation (1 to 10 MW), foreign investors can own a 49 percent stake (both in private and PPP projects). When it involves the construction of power generators of over 10 MW, foreign ownership can go up to 100 percent through PPP projects and 95 percent through private projects.
The Indonesian government wants to enlarge the role of foreign participation in the country's infrastructure development. Through a proposed revision of Presidential Regulation No 36/2010 regarding the Negative Investment List (Daftar Negatif Investasi), foreign investors will have more room for investing in Indonesia's infrastructure sector within public-private partnership schemes (PPP projects). The Indonesian government needs more foreign participation as the current state of the country's infrastructure is inadequate.
Head of the Indonesia Investment Coordinating Board (BKPM), Mahendra Siregar, stated that foreign investors will have the opportunity to obtain a license to engage in government projects in three more sub-sectors of infrastructure: transportation, drinking water, as well as electricity generation (including both the transmission and distribution of electricity).
If the new revision is approved, then foreigners can have a 95 percent stake in PPP projects connected to the construction of port facilities (docks, container terminals, and more). When foreign investors engage in these projects without a PPP structure, the foreign stake is limited to 49 percent. For airport facilities, foreigners can only have a 49 percent stake (both in private projects and PPP projects). Lastly, in toll road development and public works foreigners can have a 95 percen stake (both in private and PPP projects).
For electricity generation (1 to 10 MW), foreign investors can own a 49 percent stake (both in private and PPP projects). When it involves the construction of power generators of over 10 MW, foreign ownership can go up to 100 percent through PPP projects and 95 percent through private projects.
More Foreign Investment Allowed in Airports, Power Plants and Toll Roads
24 Dec 2013
The government of Indonesia announced on Tuesday (24/12) that increased levels of foreign direct investments will be allowed in the country’s airports, pharmaceutical industries, power plants, and toll roads. The revision of Indonesia's Negative Investment List (Daftar Negatif Investasi), the list which stipulates which sectors are closed (or partly closed) to foreign investment, is conducted in order to attract more foreign investments from abroad as a means to combat slowing economic growth in Southeast Asia's largest economy.
“The commitment is to maintain Indonesia’s economic growth and anticipating a slowdown in the global economy by encouraging investment, particularly in domestic and foreign investment,” said Economic Minister Hatta Rajasa.
Total realized investments in Q3-2013 rose 22.9 percent (yoy), which is about two percent lower than the growth pace in the second quarter of 2013. Slowing investment growth is one of the reasons why Indonesia's economy has been slowing down. The country's economy grew 5.62 percent in Q3-2013 (yoy), implying the fifth consecutive quarter of slowing economic growth.
Head of the Indonesia Investment Coordinating Board (BKPM), Mahendra Siregar, stated that under the new policy, the government raises the maximum ratio for foreign investment in pharmaceutical companies from 75 percent to 85 percent and for advertising up to 51 percent.
More details, including those for the other industries, are expected in a later stage.
The government of Indonesia announced on Tuesday (24/12) that increased levels of foreign direct investments will be allowed in the country’s airports, pharmaceutical industries, power plants, and toll roads. The revision of Indonesia's Negative Investment List (Daftar Negatif Investasi), the list which stipulates which sectors are closed (or partly closed) to foreign investment, is conducted in order to attract more foreign investments from abroad as a means to combat slowing economic growth in Southeast Asia's largest economy.
“The commitment is to maintain Indonesia’s economic growth and anticipating a slowdown in the global economy by encouraging investment, particularly in domestic and foreign investment,” said Economic Minister Hatta Rajasa.
Total realized investments in Q3-2013 rose 22.9 percent (yoy), which is about two percent lower than the growth pace in the second quarter of 2013. Slowing investment growth is one of the reasons why Indonesia's economy has been slowing down. The country's economy grew 5.62 percent in Q3-2013 (yoy), implying the fifth consecutive quarter of slowing economic growth.
Head of the Indonesia Investment Coordinating Board (BKPM), Mahendra Siregar, stated that under the new policy, the government raises the maximum ratio for foreign investment in pharmaceutical companies from 75 percent to 85 percent and for advertising up to 51 percent.
More details, including those for the other industries, are expected in a later stage.
Real Estate Indonesia: Open up Property Sector to Foreign Ownership
25 Sept 2013
Real Estate Indonesia (REI) advises the Indonesian government to open up the country's property sector to foreign ownership as this is considered to benefit the Indonesian economy through the collection of taxes and foreign exchange earnings. According to Teguh Kinarto, vice-chairman of the REI's Central Board, the state can gain a lot of revenues through taxes, such as the property tax of 10%, luxury tax of 20%, as well as various other taxes. Currently, foreigners can only buy the right to use property in Indonesia, not the right to own.
Kinarto said that if foreign investors or foreign tourists can buy property in Indonesia, it will stimulate economic activity around their places of residence. Indonesia prohibits (direct) foreign ownership of property as the country is concerned about foreign domination in the sector. However, in order to avert this alleged foreign domination, Kinarto says that the government can impose certain restrictions. For example by introducing a quota to property that is available for foreigners (such as 20 percent of the total number of apartments in an apartment complex) or by limiting foreign ownership to a specific region or price.
Currently, foreigners lease or buy the right to use property in Indonesia when wanting to use property. An often used structure is also through a joint venture with a local company or by putting property on the name of an Indonesian citizen. However, these structures obviously imply risks for the foreigner.
Taxes that are involved in the purchase of property in Indonesia are value added tax (10 percent), income tax (5 percent), tax on the acquisition of land and building (5 percent), and value-added tax on luxury goods (20 percent).
Real Estate Indonesia (REI) advises the Indonesian government to open up the country's property sector to foreign ownership as this is considered to benefit the Indonesian economy through the collection of taxes and foreign exchange earnings. According to Teguh Kinarto, vice-chairman of the REI's Central Board, the state can gain a lot of revenues through taxes, such as the property tax of 10%, luxury tax of 20%, as well as various other taxes. Currently, foreigners can only buy the right to use property in Indonesia, not the right to own.
Kinarto said that if foreign investors or foreign tourists can buy property in Indonesia, it will stimulate economic activity around their places of residence. Indonesia prohibits (direct) foreign ownership of property as the country is concerned about foreign domination in the sector. However, in order to avert this alleged foreign domination, Kinarto says that the government can impose certain restrictions. For example by introducing a quota to property that is available for foreigners (such as 20 percent of the total number of apartments in an apartment complex) or by limiting foreign ownership to a specific region or price.
Currently, foreigners lease or buy the right to use property in Indonesia when wanting to use property. An often used structure is also through a joint venture with a local company or by putting property on the name of an Indonesian citizen. However, these structures obviously imply risks for the foreigner.
Taxes that are involved in the purchase of property in Indonesia are value added tax (10 percent), income tax (5 percent), tax on the acquisition of land and building (5 percent), and value-added tax on luxury goods (20 percent).