14 May, 2014
Legal News & Analysis – Asia Pacific – Indonesia – TMT
The Indonesian government recently issued 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 (“Regulation No. 39/2014”) 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 is limited to a certain percentage investment in the entity licensed by BKPM (the “Negative List”).
2. Changes To The Negative List
Regulation No. 39/2014 makes a number of changes to the Negative List, the first revisions since 2010 (the previous Negative List being issued under Presidential Regulation No. 36 of 2010 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:
- Data Communications System Services: the maximum foreign capital ownership for data communications services has decreased, from 95% to 49% (unless integrated with wired/wireless/satellite telecommunications services in which case the maximum is now 65%);
- Internet Interconnection Services (Network Access Point): the maximum foreign capital ownership for internet interconnection services (network access point) has decreased, from 65% to 49% (unless integrated with wired/wireless/satellite telecommunications services in which case the maximum is still 65%);
- Content Services And Call Centres And Other Value Added Telephony Services: content services and call centres and other value added telephony services now have a specific maximum foreign capital ownership of 49%, rather than being categorised as requiring a partnership (without a specific maximum foreign capital ownership level, but deemed as permitting up to 100% foreign capital ownership).
- Internet Service Providers, Public Internet Telephony Services Or Other Multimedia Services: while the maximum foreign capital ownership remains at 49%, where integrated with wired/wireless/satellite telecommunications services the maximum foreign capital ownership has now increased to 65%; and
- Wired Telecommunications Services: the maximum foreign capital ownership for wired telecommunications services has increased, from 49% to 65%.
Set out below is a more detailed summary for communications and informatics.
Media:
| Business Field | Requirements | Changes (Yes/No) | Comment |
| Broadcasters:Private broadcastersSubscription 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) | Yes | While there has been a slight re-categorisation, there are no substantive changes |
| 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, bulletins (press) | 100% domestic capital | No | N/A |
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 wiringTelecommunications cafesInternet cafes | Reserved for micro, small, medium business and cooperatives | No | N/A |
| Wired/wireless/satellite telecommunications servicesWired telecommunications servicesWireless/satellite telecommunications services | Maximum foreign capital ownership of 65% | Yes | A relaxation for wired, up from 49% to 65%No change for wireless/satellite |
| 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 |
Maximum foreign capital ownership of 49% * | Yes | Data communications services tightened, down from 95% to 49%*Internet interconnection services (network access point) tightened, down from 65% to 49%*Content services and call centres and other value added telephony services now have a specific maximum foreign capital ownership of 49%, rather than being categorised as requiring a partnership (without a specific maximum foreign capital ownership level, but deemed as permitting up to 100% foreign capital ownership)
No change for internet service providers, public internet telephony services or other multimedia services* |
| * 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 | Maximum foreign capital ownership of 65% | Yes | Not previously provided |
| Performance of telecommunications equipment testing (laboratory test) | Maximum foreign capital ownership of 95% | No | N/A |
| Providers, operators (operation and renting) and provision of telecommunications tower construction services | 100% domestic capital | No | N/A |
Postal Services:
| Business Field | Requirements | Changes (Yes/No) | Comment |
| Postal/courier services | Special licences/permits and foreign capital ownership (maximum foreign capital ownership of 49% and subject to postal services laws and regulations) | No | N/A |
3. Impact Of The Changes
Pursuant to Article 9 of Regulation No. 39/2014, 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.
For further information, please contact:
David Dawborn, Partner, Herbert Smith Freehills
david.dawborn@hsf.com
Mark Robinson, Herbert Smith Freehills
mark.robinson@hsf.com
Brett Sherrard, Herbert Smith Freehills
brett.sherrard@hsf.com