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16 June 2010

Indonesia eases foreign ownership laws

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The government will issue a property regulation which will enable foreigners to possess property in Indonesia as a way to absorb an annual US$6 billion from international investors, an executive says.

Chief of the Indonesian Investment Coordinating Board (BKPM) Gita Wirjawan said Tuesday that the new regulation, scheduled to be issued in the second quarter of this year, would allow foreigners to purchase and possess residential and commercial properties.

“Possibly this month,” he added, as quoted by Antara.

Gita said that the government would also loosen some restrictions in foreign investment policy, including ending a ban on foreign ownership property.

Manager of Editorial Oxford Business Group (OBG), Josh Frankan, said that foreign ownership would generate growth in property industry as well as in the country’s earnings.

"This will generate the development of the property industry, which is in line with the government’s plan to open its doors to foreign investors," he added Indonesia has also issued a new presidential regulation that increases foreign ownership limits for certain local businesses and properties.

The negative investment list was issued to improve the nation’s investment climate for both foreign and domestic investors, and also in order to comply with the ASEAN Economic Community commitment, officials say.

The government, for example, raised the maximum ownership for foreign investors in the construction sector to 67 percent from 55 percent, and the hospital services sector to 67 percent and 65 percent under the new negative investment list.

Hospitals owned by foreign investors can expand their activities nationwide, the regulation states.

“Foreign investors can also own up to 95 percent of power plants,” said Investment Coordinating Board (BKPM) head Gita Wirjawan in a press conference Wednesday.

Foreign investors can then sell their shares to domestic investors, or through Indonesia’s stock market, or the company can buy the shares, to be treated as treasury stock.

In line with the Asean Economic Community commitment, the regulation sets out an attachment providing Asean investors higher maximum ownership in some sectors, including cargo handling, foreign sea vessels and recreation.

Asean investors may own up to 60 percent of cargo handling services, higher than the 49 percent regulated for other foreign investors. Asean investors can also own up to 60 percent of foreign sea vessels and 100 percent of recreation businesses.

“Therefore, there will no longer be inconsistencies between domestic and ASEAN [regulations],” said Deputy Trade Minister Mahendra Siregar. Also in the regulation, the government stipulates ownership of base transceiver stations must be 100 percent local, after an intense debate between BKPM and the Communications and Information Technology Ministry.


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