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CLIENT ALERT 2021 | Amendment to the Investment List

9 July 2021

CLIENT ALERT 2021

Amendment to the Investment List:

Issue: 2 July 2021

Andika Mendrofa

Partner

andika.mendrofa@mhmadvocates.com

Helena Sitorus

Counsel

helena.sitorus@mhmadvocates.com

Shanti Prameshwara

Associate

shanti.prameshwara@mhmadvocates.com

MacalloHarlin Mendrofa Advocates

Graha CIMB Niaga, 2nd Floor

Jl. Jend. Sudirman Kav. 58

Jakarta 12190, Indonesia

P +62 21 250 5858, +62 21 250 5959

F +62 21 250 5650

www.macalloharlinmendrofa.com

The Government of Indonesia Officially Closed the Alcoholic Beverage Industries for Foreign Investment, and also Made Some Other Changes

The Updates

As a response to the complaints of many Indonesian societies on the opening of foreign investment for alcoholic beverage industries, the Government of Indonesia (“GOI”) has now officially closed alcoholic beverage industries for foreign investment and limited the foreign investment for wholesale and retail trading of alcoholic beverages, by issuing Presidential Regulation No. 49 of 2021 on the Amendment of Presidential Regulation No. 10 of 2021 on the Business List of Investment which was effective on 25 May 2021 (“Amended Investment List”).

Please see our client alert on the Investment List here.

The GOI, through the Amended Investment List, also makes some changes on several other lines of business and their Indonesia Business Classification Code (Klasifikasi Baku Lapangan Usaha Indonesia or also known as “KBLI”).

Discussions

The Changes

The Amended Investment List amends several provisions in Presidential Regulation No. 10 of 2021 on the Business List of Investment (“Investment List”), as follows:

1. Closed Lines of Business

The Amended Investment List does not only restrict (i) six lines of business as referred to in Article 12 of Law No. 25 of 2007 on the Investment as amended by Law No. 11 of 2020 on the Job Creation, and (ii) activities in relation to public services or strategic defense and security which reserved solely for the central government, but also:

    1. Alcoholic liquor industries (KBLI 11010);
    2. Alcoholic beverage industries: wine (KBLI 11020); and
    3. Malt beverage industries (KBLI 11031).

2. Opened Lines of Business

    1. Prioritized Lines of Business
      The Amended Investment List amends the list of prioritized lines of business by adding some lines of business and KBLIs into the list.
    2. Lines of Business Allocated or Reserved with Partnership with Cooperatives and Micro, Small and Medium Enterprises (“MSME”)
      The Amended Investment List amends the list of lines of business allocated or reserved with partnership with cooperatives and MSME by adding some lines of business and KBLIs into the list.
    3. Lines of Business Opened with Conditions
      The Amended Investment List provides that alcoholic beverages wholesales (importers, distributors and sub-distributors) (KBLI 46333), alcoholic beverages retails (KBLI 47221) and alcoholic beverages street retails (KBLI 47826) are strictly restricted and supervised, and specifically regulated under alcoholic beverages related laws and regulations.

       

      The Amended Investment List also reduces the list of lines of business opened with conditions from 46 to 37 lines of business by removing 11 existing lines of business (some are completely removed, and others are moved to the list of lines of business allocated or reserved with partnership with cooperatives and MSME) and adding two new lines of business and some new KBLIs in main tools industries

    4. Lines of Business not Covered in the Investment List
      The Amended Investment List provides that all lines of business which are not subject to certain restrictions in the Amended Investment List are 100% open for any investment (foreign and domestic) provided that those lines of business are commercial in nature.

A summary of changes of the lists made in the Amended Investment List is attached in Schedule 1 below.

Conclusion

The enactment of the Amended Investment List is to meet public demands to close alcoholic beverage industries for foreign investment and simultaneously to improve the list to attract more investors. However, again, we are in the view that the Amended Investment List shall be followed with sufficient and supportive sectoral implementing regulations and policies which are in favour of investment so that the Amended Investment List can be put into practice.

***

 

Schedule 1
The Opened Lines of Business

1. Prioritized Lines of Business

Line of BusinessRemarks
Prioritized Lines of Business (for tax holiday facility)
1. Organic basic chemical industry sourced from crude oil,
natural gas, and/or coal without or with their integrated derivatives

10 (ten) new KBLIs, i.e.:
1. Coal products industry which produces a semi-coke (semi-kokas) (KBLI 19100A);
2. Organic basic chemical industry which produces marine fuel oil (KBLI 20117M);
3. Industry which produces catalyst (KBLI 20118B);
4. Artificial rubber industry which produces styrene butadiene rubber (SBR) which is integrated with the basic organic chemical industry (KBLI 20132A);
5. Artificial rubber industry which produces polychloroprene (neoprene) which is integrated with the basic organic chemical industry (KBLI 20132B);
6. Artificial rubber industry which produces acrylonitrile butadiene rubber (nitrile rubber) which is integrated with the basic organic chemical industry (KBLI 20132C);
7. Artificial rubber industry which produces ethylene-propylene-non-conjugated diene rubber (EPDM) which is integrated with the basic organic chemical industry (KBLI 20132D);
8. Artificial rubber industry which produces silicone rubber (polysiloxane) which is integrated with the basic organic chemical industry (KBLI 20132E);
9. Industry which produces polyethylene film (KBLI 22291A); and
10. Industry which produces asphalt (KBLI 23990A).

2. Main pharmaceutical raw material industry without or with its integrated derivates

1 (one) new KBLI, i.e., industry which produces vitamins (KBLI 21011D).

3. Manufacturing industry of motor vehicles and main components of motor vehicles
3 (three) new KBLIs, i.e.:
1. Industry of electric vehicles with four or more wheels integrated with batteries and electric motors (KBLI 29101A, before in the Investment List was KBLI 29100A);
2. Industry of vehicles with four or more which are integrated with the manufacture of at least two main components of four or more wheeled motorized vehicles (KBLI 29101B); and
3.Industry of electric vehicles with two or three wheels (KBLI 30911A).

4. Manufacturing industry of main components of railways
Change of KBLIs, i.e.:
1. Construction, maintenance and reparation activities of railway signal building construction (from KBLI 42216A to KBLI 42205A); and
2. Construction, maintenance and reparation activities of railway telecommunications (from KBLI 42216B to KBLI 42205B).

5. Processing industry based on agricultural, plantation or forestry products which produces pulp without or with its derivatives

6 (six) new KBLIs, i.e.:
1. Industry of cultural paper integrated with industry which produces pulp (KBLI 17012A);
2. Industry of other paper integrated with industry which produces pulp (KBLI 17019A);
3. Industry of paper and paper board integrated with industry which produces pulp (KBLI 17021A);
4. Industry of packaging and boxed made from paper and cardboard integrated with industry which produces pulp (KBLI 17022A);
5. Industry of tissue paper integrated with industry which produces pulp (KBLI 17091A); and
6. Industry of other goods made from paper and cardboard integrated with industry which produces pulp (KBLI 17099A).

6. Economics infrastructure

2 (two) new KBLIs, i.e.:
1. Investment and operations activities of crude oil and/or fuel oil storage tanks (oil tanking) (KBLI 52101A); and
2. Long-distance rail transportation for passengers (KBLI 49110A).

Change of KBLIs, i.e.:
1. New and renewable energy power plants (from KBLI 35101A to KBLI 35111A); and
2. Toll road construction (KBLI 42101) (before in the Investment List was toll road construction with low IRR (KBLI 42111A)).

7. The digital economy which includes data processing, hosting and other related activities

1 (one) new KBLI, i.e., satellite telecommunications activities (KBLI 61300).
Prioritized Lines of Business (for investment allowance facility)

8. Stove industry

Additional of a new line of business which covers all products in KBLI 27530.

2. Lines of Business Allocated or Reserved with Partnership with Cooperatives and MSME

Line of BusinessRemarks
1. Brown sugar industry (KBLI 10722)Additional of new lines of business.
2. Cutlery and hand tools industry (KBLI 25932)Additional of new lines of business.
3. Travel agent activities (KBLI 79111)Additional of new lines of business.
4. Tour guides (KBLI 79921)Additional of new lines of business.
5. Fruits and vegetables pickling industry (KBLI 10311)Additional of new lines of business.
6. Copra industry (KBLI 10421)Additional of new lines of business.
7. Powdered and condensed milk industry (KBLI 10520)Additional of new lines of business.
8. Soy sauce industry (KBLI 10771)Additional of new lines of business.
9. Rattan processing industry (KBLI 16104)Additional of new lines of business.
10. Nails, nuts and bolts industry (KBLI 25952)Additional of new lines of business.
11. Components and parts of engine and turbines industry (KBLI 28113)Additional of new lines of business.
12. Other pumps, compressors, tapes and valves industry (KBLI 28130)Additional of new lines of business.
13. Retail trade by postal and internet ordering which includes:
– retail trade through the media for commodities of food, beverages, tobacco, chemicals, pharmaceuticals, cosmetics
and laboratory equipment (KBLI 47911);
– retail trade through the media for commodities of textiles, clothing, footwear, and personal goods (KBLI 47912); and
– retail trade through the media for household goods and kitchen utensils (KBLI 47913).
Additional of new lines of business.

14. Food and processed food industry (rendang) (KBLI 10750)
Moved to the list of lines of business allocated or reserved with cooperatives and MSME.
15. Kerupuk, keripik, peyek and others industry (manufacturers or non-manufactures) (KBLI 10794)Moved to the list of lines of business allocated or reserved with cooperatives and MSME.

16. Batik industry for hand-drawn and combination of hand-drawn and stamped (KBLI 13134)
Moved to the list of lines of business allocated or reserved with cooperatives and MSME.
17. Wood products non furniture industry: wood carvings, reliefs, masks, statuettes, wayang (KBLI 16293)Moved to the list of lines of business allocated or reserved with cooperatives and MSME.

3. Lines of Business Opened with Conditions

Line of BusinessRemarks
1. Radio community broadcaster (KBLI 60102)Removed.
2. Television community broadcaster (KBLI 60202)Removed.
3. Post activity (KBLI 53100)Removed.
4. Liquor industry containing alcohol (KBLI 11010)Moved to the list of closed lines of business.
5. Alcoholic beverage industry: wine (KBLI 11020)Moved to the list of closed lines of business.
6. Beverage industry containing malt (KBLI 11031)Moved to the list of closed lines of business.
7. Retail on alcoholic beverage (KBLI 47221)Subject to alcoholic beverages related laws and regulations.
8. Street retail on alcoholic beverage (KBLI 47826)Subject to alcoholic beverages related laws and regulations.
9. Food and processed food industry (rendang) (KBLI 10750)Moved to the list of lines of business allocated or reserved with partnership with cooperatives and MSME (see points 14, 15 and 17 of item (b) above).
10. Industry of kerupuk, keripik, peyek and others (manufacturers or non-manufactures) (KBLI 10794)Moved to the list of lines of business allocated or reserved with partnership with cooperatives and MSME (see points 14, 15 and 17 of item (b) above).
11. carvings, reliefs, masks, statuettes, wayang (KBLI 16293)Moved to the list of lines of business allocated or reserved with partnership with cooperatives and MSME (see points 14, 15 and 17 of item (b) above).
12. Industry of batik for hand-drawn (batik tulis) and combination of hand-drawn and stamped (batik tulis dan batik cap) (KBLI 13134)Moved to the list lines of business allocated or reserved with partnership with cooperatives and MSME (see point 16 of item (b) above). Only stamped batik (batik cap) industry is still in the list of lines of business with conditions.
13. Main tools industry which includes:
– weapons and ammunition industry (KBLI 25200);
– war vehicle industry (KBLI 30400);
– defense radar industry for weapons systems (KBLI 26513);
– warship industry (KBLI 30111); and
– military aircraft industry (KBLI 30300) (before in the Investment List was only main tools industry (KBLI 25200)).
Additional of new lines of business and KBLIs.
– Courier activity (KBLI 53201)Additional of new lines of business and KBLIs.
– Art gallery (KBLI 90011)Additional of new lines of business and KBLIs.