Indonesia Revises Foreign Investment Levels For Communications And Informatics

27 May 2016 Insight Jakarta

Article

The Indonesian government recently issued Presidential Regulation No. 44 of 2016 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment (“Regulation No. 44/2016”), which changes the permitted levels of foreign investment including in relation to communications and informatics.

1. Background

Foreign entities must obtain a license issued by BKPM (the Investment Coordinating Board) in order to conduct business in Indonesia. The Indonesian government has issued a number of Presidential Regulations setting out a list of sectors that are either wholly closed to foreign investment or in which foreign investment in the entity licensed by BKPM is limited to a certain percentage (the “Negative List”).

2. Changes to the Negative List

Regulation No. 44/2016 makes a number of changes to the Negative List, and effectively replaces Presidential Regulation No. 39 of 2014 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment.

Notably, for communications and informatics:

telecommunication services: the maximum foreign capital ownership for a range of telecommunication services, including content services, call centres and VAS, internet service providers, data communications services, public internet telephony services, internet interconnection services and other multimedia services has been revised upwards from 49% to 67%;
wired/wireless/satellite telecommunications: the maximum foreign capital ownership for both wired and wireless/satellite telecommunication service providers, as well as wired/wireless/satellite telecommunications services integrating with other telecommunication service providers such as internet service providers and data communications services, has been revised from 65% to 67%; and
e-commerce service providers: a category which was not previously limited in terms of foreign investment levels, the maximum foreign capital ownership in e-commerce service providers (marketplace-based platforms, daily deals, price grabber, classifieds) with investments less than 100 billion Rupiah (approximately US$7.35 million) is now 49%. Retail e-commerce continues to be restricted to 100% domestic capital.

Set out below is a more detailed summary for communications and informatics.

Telecommunications and satellite:

Business Field	Requirements	Changes (Yes/No)	Comment
Management and operation of radio frequency spectrum and satellite orbit monitoring stations	Closed to investment	No	N/A
Home and building cable wiring Telecommunications cafes Internet cafes	Reserved for micro, small, medium business and cooperatives	No	N/A
Providers, operators (leasing and operating) and provision of construction of telecommunication towers	100% domestic capital	No	N/A
Telecommunications services: Content services (ringtone, premium short message services, etc) Call centres and other value added telephony services Internet service providers Data communications services Public internet telephony services Internet interconnection services (network access point), other multimedia services	67%	Yes	Increased from 49% to 67%
Wired/wireless/satellite telecommunications services Wired telecommunications services Wireless/satellite telecommunications services	67%	Yes	Increased from 65% to 67%
Wired/wireless/satellite telecommunications services integrating with internet service providers, data communications services, public internet telephony services, internet interconnection services (network access point), or other multimedia services	67%	Yes	Increased from 65% to 67%

e-Commerce:

Business Field	Requirements	Changes (Yes/No)	Comment
e-Commerce Service Providers (marketplace-based platforms, daily deals, price grabber, classifieds) with investments less than 100 billion Rupiah (approximately US$7.35 million)	49%	Yes	Not previously limited
Retail e-Commerce	100% domestic capital	No	N/A

Media:

Public broadcasters: radio and televisionSpecial licences/permits (monopolised by public broadcasters (Radio Republik Indonesia (RRI), Televisi Republik Indonesia (TVRI) and local public broadcasters (LPPL))NoN/ARadio and television community broadcastersReserved for micro, small, medium business and cooperativesNoN/APublishing of newspapers, magazines and bulletins (press)100% domestic capitalNoN/A

Business Field	Requirements	Changes (Yes/No)	Comment
Broadcasters: Private Broadcasters Subscription Broadcasters	100% domestic capital and special licences/permits (for business expansion and development only, maximum foreign capital ownership of 20% and subject to broadcasting laws and regulations)	No	N/A
Public broadcasters: radio and television	Special licences/permits (monopolised by public broadcasters (Radio Republik Indonesia (RRI), Televisi Republik Indonesia (TVRI) and local public broadcasters (LPPL))	No	N/A
Radio and television community broadcasters	Reserved for micro, small, medium business and cooperatives	No	N/A
Publishing of newspapers, magazines and bulletins (press)	100% domestic capital	No	N/A

Postal services:

Business Field	Requirements	Changes (Yes/No)	Comment
Postal Services	49%	No	N/A

3. Impact of the changes

Pursuant to Article 13 of Regulation No. 44/2016, the changes to the Negative List do not apply to investment in specified business fields approved prior to the regulation being issued, unless such provisions are of more benefit to the relevant investment.

Indirect or portfolio investment with transactions being made through domestic capital markets continue to be permitted.

Herbert Smith Freehills, alongside our affiliate firm, Hiswara Bunjamin & Tandjung, provides high quality, innovative legal services and unparalleled local knowledge in relation to Indonesia with a specialist local and international tech, media and telecoms (TMT) team. Please contact us for further information.