Indonesia’s New Investment Regime: Telecommunication, Media, and Technologies Sector

Following up the new investment regime as introduced by Law No. 11 of 2020 on the Job Creation or known as Omnibus Law, the President of Republic of Indonesia has issued a new legal framework on the business investment which is now promoted as positive list, (Presidential Regulation No. 10 of 2021 on the Investment Business Field that has been amended by PR No. 49 of 2021 (“PR 10/2021” or “Positive List”)).

PR 10/2021 specifies substantial changes to Indonesia’s Foreign Direct Investment (FDI) regime. It generally stipulates that all business sectors are now open for foreign investment unless it is stated that it is completely closed off to foreign investments; or specifically reserved for central government (Art. 2 (1) of PR 10/2021).

Due to the broad changes in the FDI regime, we will now focus our analysis of this article specifically on the technology, media, and telecommunications (“TMT”) sector.

Legal Frameworks: The executive summary below is referred to the following prevailing regulations:

  1. PR 10/2021, which has revoked and repealed the PR 44 of 2016 on Lists of Business Fields That Are Closed and Open with Conditions to Investment or known as Negative Investment List (“PR 44/2016” or “NIL”); and
  2. Chief of the Statistical Bureau Regulation No. 2 Year 2020 on the Indonesian Industrial Standard Classifications 2020 (“KBLI 2020” or “KBLI”).

Telecommunications Business Activities: PR 10/2021 eliminates the foreign ownership limitations on various telecommunication business activities, such as fixed and mobile telecommunication networks, these sectors previously were restricted to a maximum of 67% foreign ownership.

Given such changes, foreign investors may now raise their stakes on telecommunication companies or enter into various telecommunications activities on their own, without having to establish a joint venture with local partners. However, please note that any changes of shareholding structures must be first approved by and/or reported to the Ministry of Communication and Informatics, which shall depend on the fulfillment of the applicable commitments for each telecommunication license holder.

See below the comparison on foreign ownership limitations based on NIL and the new Positive List provisions for your ease of reference.

Media and Broadcasting Business Activities: PR 10/2021 now allows newspaper, magazines, and bulletin publishing activities (KBLI 58130) to have a maximum of 49% foreign ownership for a publicly listed company (previously such KBLI was completely reserved for domestic investment).

However, the strict limitation on foreign ownership in private and subscription-based broadcasting activities (KBLI 60102, KBLI 60202) remains the same, in which maximum foreign ownership of 20% for raising working capital or business expansion still applies.

Digital Platform Business Activities: The Positive List now allows web portals and digital platforms for commercial purposes (i.e., marketplaces, on-demand online services, other commercial digital platforms, etc) (KBLI 63122) to be 100% open for foreign investment, without any investment value requirement. Previously, it was restricted to a maximum of 49% of foreign investment for a platform with an investment value of less than IDR 100,000,000,000 (one hundred billion Rupiahs).

NLP Commentary to the Positive List on TMT Sectors: Indonesian government is taking huge steps to promote investment, create job opportunities, and strengthen the domestic economy through the Omnibus Law. One of the steps is eliminating maximum foreign ownership restriction in many business sectors, including TMT, energy, tourism, etc.

We trust that the significant relaxation of FDI requirements on TMT sectors will likely entice foreign investors and simultaneously gives a positive impact on Indonesia’s economy, particularly on the development of digital infrastructure sector.

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.

Contributing Advisors