Monday, 2 December 2013


The Government planned to release revised version of Investment Negative List [DNI] by end of 2013. Essentially the revision included opening of new access and expansion of existing access for foreign investors in all fields. The objective was to increase investments; but the excess was that foreign domination over Indonesia’s economy would strengthen.

Coordinating Minister of Economy Hatta Rajasa stated in Jakarta last Wednesday [6/11] held a coordinative meeting on DNI regulated by the Presidential Regulation no 36/2010. The closed meeting was attended among others by the Minister of Manpower and Transmigration Muhaimin Iskandar, Head of the Coordinating Board of Investment [BKPM] Mahendra Siregar, Deputy Finance Minister II Bambang Permadi Soemantri Brodjonegoro, and Chairman of Apindo Sofjan Wnandi.

The Government felt it necessary to revise DNI as adaptive measure to the present global condition. The revision was exercised by at least four principle.

Firstly, to promote investment. Business access would be made open while still safeguarding national interest with reference to the Law in effect.

Secondly, revision was not more restrictive than the old rules.

Thirdly, harmonization of regulating business. Originally there was one business line regulated by two ministries which was troublesome. In the future he should be enough for one business line to be regulated by one ministry.

Fourthly, grouping of businessliness. There were some businesslines to be safeguarded, like small business and agriculture.

The meeting stipulated that 5 business lines which were previously closed to foreign investors would be opened. Airport business, harbors, and airport management business would be opened to 100%. Not in terms of asset but management.

Two other business lines to be opened were land terminals and goods terminals, capital ownership would be accessible up to 44%. Some business lines already accessible would have their accessability expanded. They were for example nature tourism to be expanded from 49% to maximum 70%; pharmaceuticals from 75% to 85%.

The objective was to make investors look at Indonesia not just as market but as good investment base in which to increased added value, and as production base for export.

The spirit of DNI was sensible in view of the dynamics of internal and external change. Indonesia could not drift away from the external environment and all the connectivity aspect. Moreover the MEA 2015 would soon be implemented so the Government was demanded to make adjustments in many respect including investment.

The above policy was inclusive of considering national interest so Indonesia’s economic independence was still well guarded. The Government and private sector must ascertain that enhancement of foreign investment was not disadvantageous to domestic interest.

Increasing accessability to Indonesia’s economy for foreigners was indeed justifiable in an open economy system, as long as they were based on sound national interest, not foreigner’s interest.

The problem was that very frequently the Government hastily open acess only to realize problems after too late. An example was the case in the banking sector. When the valve in the banking sector was opened in 1998, investors from Singapore, Malaysia and India rushed in.

The consequences was the masterplan of the banking industry was determined by foreigners, and the Government’s role was minimized. Now in the banking sector at least 12 private banks were foreign banks. In the oil-gas mining sector, 70% were dominated by foreigners, in copper and gold sector, around 85% were owned by foreigeners.

In the palm plantation sector, around 40% of the 8.9 ha of plantation were foreign dominated. In the telecommunication sector, 35% to 66.5% of business were foreign owned. Many circles recommended that DNI be specifically accompanied by the right incentive such as in location designation. Thereby private and national interest could be synchronized. Without strategy, loss of national interest was bound to be. The DNI revision should be of mutual benefit.

For comparison, it took China 9 years to run liberalization. The strategy was to strengthen the real sector first, then the banking sector. A process as such was never exercised in Indonesia. Here Indonesia, the financial sector was liberalized first, then the real sector followed. The positive effect was not there because there was a mess of problem in the real sector still unsolved, such as in problem of land clearing.

Many parties claimed they were not surprised with the Government policy on investment because it was simply an implementation Law no 1/1967 on foreign investment and other law rated as instrument of liberalization. The regulations had been brought to the Constitutional Court for testing. The strategic issue was that Indonesia must not sell short by any reason at all. 

All was not on account of neo liberalization adopted by Indonesian leaders today, but also due to inferiority complex. The result was that some Indonesian tend to idolize foreigners. Indonesia' founding fathers were split in two in terms of belief. Ir Sukarno was anti-capitalism but  Mohammad Hatta believed that national development could never be without capital. The compromise solution would be. "Foreign capital is needed but never let them rule Indonesia's economy. 

Business News - November 13, 2013

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