3 Keys to Understand Negative List of Investment in Indonesia

Negative List of Investment (Daftar Negatif Investasi/ “DNI”) is a tool for the Indonesian government to control direct investment in Indonesia whether it was made by foreign or local investors. Currently, it is regulated by Presidential Regulation 44 of 2016.

The Indonesia government has tried to make the current DNI to be easily understood by investors, however, in order to understand it clearly, you need some accumulated experience from research into the relevant government institution and related regulation.

The following are the 3 keys to understanding the DNI based on our experience.

1. Know Your Business

You need to know exactly the business activity that you are planning to do in Indonesia. This will be the easiest part if your planned business in Indonesia will be the same with your existing business.

However, the problem might arise when you do not understand Indonesian language to help articulate your plan clearly. Fortunately, there are many Indonesian and government official in Indonesia who may speak English fluently.

The other major problem left is if you do not want to be honest with your business activity in Indonesia whether because (i) internationally your product or service is prohibited, (ii) the business is close or open conditionally with some restrictions but still you want to do the business and do not want to have any restriction, or (iii) your type of business does not exist in Indonesia.

Strictly, no solution might be provided for problem one, some solutions might be provided for number two (with risk) while innovative approaches are required to find solutions for the number three.

2. Match Your Business Activity with KBLI Code

After understanding your business activity, you can easily search for a code that matches with your business activity classification in the Indonesian Business Classification Code (Klasifikasi Baku Lapangan Usaha Indonesia/ “KBLI”). The KBLI is written in Indonesia, however, it has similar code and classification with International Standard Industrial Classification of All Economic Activities (“ISIC”) issued by United Nation Statistic Division that you can relate with.

Understanding KBLI will not just help you to see whether your business is open, conditionally open, or restricted, but it will also help you to describe completely your business activity in your company article of association when you meet a notary for your company registration.

3. Match KBLI Code with DNI

DNI only consists of business activity lists that are: (i) closed, (ii) reserved for SME, and (iii) conditionally open. Therefore, if there is no match between the KBLI Code and the DNI, then in principle your business is open 100% for foreign investment (and also local investment).

The list of business activities that are conditionally open still gives room for the foreign investor to do the investment with some requirements (condition) that need to be followed by the investor. The requirements include maximum foreign share ownership, technical ministry recommendation/permit, etc.

Kindly note that there are some business activities that though they are not stated in the DNI, they may still have some requirements that the investor who intends to engage in the business needs to follow, such as investing in the banking industry.

Still Confused? Get Confirmation from BKPM

Even an experienced person may still get confused with the DNI as it’s a part of investment law that is complexly regulated which may be changed over time. If you still need clarification, it is strongly advised to get confirmation from Investment Coordinating Board (Badan Koordinasi Penanaman Modal/ “BKPM”).

As mentioned earlier, there are so many government officials who speak English including officials in BKPM. In addition, BKPM also accepts documents written in English for its correspondence or application purpose. Furthermore, BKPM also has a specialized foreign desk that speaks foreign languages including Mandarin, Japanese, and Arabic.

As said by Vanessa Redgrave “Ask the right questions if you’re going to find the right answers.” It is important for you to do all the three above as your preliminary research in order to ask the right questions and obtain the right answer from the BKPM official.

(pr)

Reference (downloadable via Google Drive)

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