Faced with an economic downturn, the Indonesian government began to reorganize the laws on foreign ownership in certain sectors, starting with tourism investments.
For many foreigners doing business in Indonesia has long been an interesting opportunity. The country strengthened in terms of purchasing power, population and diversity. It is also becoming a world-renowned hotspot for tourism.
Unfortunately, the prospect of legally do business in Indonesia comes with caveats, particularly in the case of foreign ownership in companies that take money in the local economy. Most sectors have caps in place that limit foreign ownership to a maximum of 51 percent from 2014; the last formal review of Negative List of government investment. Historically, foreign companies were made to jump through hoops just to operate legally in the archipelago.
Sizeable companies looking to do business in Indonesia without a local partner generally must set up a foreign investment entity. Indosight, a service entry in the market for foreign companies in Indonesia, said it usually means a company must have about 1 million $ capital on paper, with 25 percent of the amount paid in advance on a bank account Indonesian. It is not easy for small and medium businesses looking to tap into the nation's tourism industry. If foreigners want to be cowboys about it - and many do - they need to find a trusted local partner to act as a business owner. It happens more often than some might think.
Soon, however, these all too familiar woes can no longer apply.
BKPM to allow foreigners full ownership of restaurants, bars and cafes
Coordinating Board (BKPM) said recently it would allow foreigners full ownership of bars, cafes, restaurants and sports centers in an attempt to increase interest in the nation's tourism industry.
Travel and Leisure Space of Indonesia is probably about to prosperity as more than 9 million tourists came from abroad over the last 12 months. However, due to strict limits on foreign investment and volatility of the political landscape of the nation, many companies have been reluctant to put their money in Indonesia, instead opting for countries like Malaysia and neighboring Thailand.
It seems that Indonesian officials took note of missed opportunities, and are now rethinking their strategy against foreign companies.
"With this revision, we try to build a perception that Indonesia is more open. With this rule, we believe that the investment commitment could increase by 50 percent last year, "head of BKPM Franky Sibarani recently told reporters. last year, Indonesia eased visa requirements for 84 countries for purposes related to tourism. BKPM now claims that he worked on increasing this number , consolidating its determination to a tourist economy booming.
at the end of this quarter, BKPM said he will also revised negative list of Indonesia's investment. the list shows all sectors Indonesia open to foreign investment, and the maximum percentage of foreign ownership can have in each space. Relaxed property laws are expected to take effect in several industries, including movies, e-commerce, manufacturing and 'storage.
Experts say there is a strong chance to see some major changes when the negative list of investment update released in April. Although all sectors are expected to see the same clemency as tourism, analysts believe most industries have seen the foreign equity limits peak until approximately between 60 percent and 70 percent.
But there is no good news for foreigners. Chairman of BPKM, Mahendra Siregar recently revealed that the government has chosen to reduce foreign ownership in other sectors. In oil drilling services and gas onshore and offshore, for example, foreign ownership is now capped at 75 percent, compared to the previous 95 percent.
There is speculation as to why the government chooses to reorganize the laws now. The news comes on the heels of reports that Indonesia is facing slow economic growth and growth retardation. But even with the declining state of the economy, opening up prospects of full ownership of tourism businesses such as bars and restaurants to foreign rekindled investor interest to oversea.
"In the past, people have always been interested in investing in Indonesia. However, ownership restrictions meant that we would have to find partners, which mostly would not have the same objectives we did, causing the deal to fall through, "says Raja Lalwani, a private investor from Dubai looking to get into the catering market of Indonesia." Being able to have the full control opens more possibilities than we previously thought. "
Lin Neumann, CEO of the uS Chamber of commerce in Indonesia, said that the promises due to President Joko Widodo to ease restrictions investment, the Chamber must also make radical changes. "the trend has been to limit investment. For the first time in ten years, you have a president saying the opposite, "he recently told reporters.
This is contrary to the laws previously implemented. In the past, the completely finished Indonesia foreign investment in the retail sector, and she very limited in the agriculture and electricity. the reports claim that foreign shares in some oil and gas companies have seen the collapse of the property 95 percent to nothing. analysts believe that although the restrictions are not as heavy on investments in tourism, the increasing number of legal regulations applicable to the surrounding areas caused investors to be skeptical that tourism of Indonesia would not suffer the same fate.
As with most government requests, rumors and speculation abound, and not much can be said with certainty at this time. The proposed changes have already seen increased opposition officials and legislators, which means that there will be a lot of back and forth speech on the issue before people like Raja Lalwani will be able to open a bar on Seminyak beach.