Indonesia Opens Doors to Foreign Investment

Jakarta (News Today) - Indonesia on Wednesday raised foreign ownership caps in sectors such as agriculture and healthcare in a bid to lure offshore investment and remove legal uncertainty. President Susilo Bambang Yudhoyono signed a decree intended to clear up doubts about foreign ownership which have hobbled investment across a range of industries, officials said.

In particular it will open up the staple food plantation sector for the first time, though foreign holdings were capped at 49 percent of individual companies. “This comes into immediate effect,” Investment Coordinating Board chairman Gita Wirjawan told AFP.

“The most significant thing about this is that there is a rule, a regulation, that tells them (foreign investors) how much they can invest... Everything is clear now.”

Indonesia’s expanding middle class, natural resources, low wages, political stability and domestic market of some 240 million people have made it an increasingly attractive destination for foreign investment. But investors complain that they are being held back by red tape, overlapping regulations, corruption and a lack of legal certainty despite Yudhoyono’s promises to remove “investment bottlenecks”.

“The aim is to basically provide a clear-cut and simple explanation as to the extent to which foreign investors can invest in any particular sector. This was not the case previously,” Wirjawan said.

The ceiling for foreign ownership in hospitals rose to 67 percent nationwide compared to 65 percent in certain major provinces only. But the lowering of barriers to foreign investment did not go as far as telecommunication towers, despite strong overseas interest.

Actual foreign direct investment dropped around 20 percent in 2009 to 10 billion dollars from a year earlier amid the global economic crisis. The Bin Laden Group from the Middle East last year cancelled a plan to invest around one billion in a food estate project in Papua province because the government planned to cap its share in the project at 49 percent.

The opening up of the hospital sector could pave way for some regional healthcare providers, such as Singapore’s Parkway Holdings, to enter the world’s fourth most populous country, analysts said.

Source : kompas.com

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