Indonesia to free up some areas for foreign investment

INDONESIA plans to unlock more sectors to overseas investors including health, agriculture and creative, although it will not allow investment in telecommunication towers, the head of the country's investment coordinating board said.

Gita Wirjawan said a draft on investment in strategic areas, known as the negative list on foreign investment, had been finalised and should be approved soon.

There has been fierce resistance from local vested interests to proposals to open up multi-billion dollar investment in areas such as base towers for mobile phones and there could still be other late changes in the draft.

"We have finalised the draft and by the end of this month, if it's not plus a few more weeks, we should have it signed by the president," Wirjawan said Friday, referring to the a revised draft of the current negative.

In healthcare, foreign investors would be allowed to hold up to 67 per cent in hospitals across Indonesia, he said. Previously, foreign ownership had been restricted to a few provincial cities such as Surabaya, in East Java and Medan, North Sumatra.

Foreigners will be allowed to have a maximum ownership of 49 per cent in staple food plantations like rice, as well as cargo services and film businesses, added Wirjawan, a former investment banker with JPMorgan and Goldman Sachs.

"We actually also agreed on up to 49 per cent foreign ownership in education institutions. But since the education institutions must be non-profit entities, as the law says, then it may be hard for foreigners to set up non-profit education institutions," he said.

"As for telecommunication towers, we have agreed to keep it shut," said Wirjawan, who was appointed last year by President Susilo Bambang Yudhoyono with a mandate to boost investment. After these revisions, Indonesia would still have about 23 sectors closed for overseas investors, including radio and television, and alcoholic beverages, Wirjawan said.

Indonesia has faced stiff competition from regional rivals such as Vietnam and China attracting foreign direct investment, and investors often complain about obstacles such as tortuous red tape, widespread corruption and a shaky legal system.

Southeast Asia's largest economy has set a target of lifting foreign direct investment by 15 per cent this year, after it attracted about US$10 billion in 2009.

Wirjawan has previously said Indonesia should be able to achieve a "sweet spot" of total investment of US$25 billion to US$35 billion a year, Wirjawan said.Reuters