Nani Afrida, The Jakarta Post,

Jakarta -A dozen foreign companies have expressed interest in making more than US$5 billion in investments in Indonesia over the next three to five years, an official says.

“Their interests include coal, railways, ports and bauxite smelting,” Investment Coordinating Board (BKPM) chairman Gita Wirjawan Gita said on Monday after the European Union-Indonesia Business Dialogue in Jakarta.

In the case of bauxite, a planned smelter would process the ore into aluminum, he said.

“The smelter will boost the bauxite’s value, so Indonesia will get benefits from the smelter,” Gita said.

Jakarta,– The Investment Coordinating Board of The Republic of Indonesia (BKPM) announced and gave Appreciation To the One Stop Service Providers (PTSP) in the Field of Best Investment in Level of Province, Regency and City of the Year 2010.
This award is one efforts in success of the Presidential Instruction Number 1 Year 2010 on the Acceleration of Implementation of National Development and the Joint Circular of the Minister of Home Affairs, Minister for Administrative Reform and the Chairman of BKPM No. 570/3727/SJ; Number SE/08/M.PAN-RB/9/2010; Number 12 Year 2010 on 15 September about the Synchronization the Implementation of Investment Services in the Region.
“This award is an appreciation of BKPM for the efforts held by local governments in providing licensing service and non-licensing related to investment. It is expected that areas that receive the award will continue to maintain and continuously improve the quality of services to investors and potential investors. And for other areas that have not been awarded, this can spur healthy competition in order to improve the implementation of PTSP, “said Chairman of BKPM, Gita Wirjawan.
In 2010 BKPM has conducted evaluation and assessment of qualifications to 130 One Stop Service Providers in Capital Investment at province, regency and city. Implementation of assessment refers to Rule of Capital Investment Coordinating Board Number 11 Year 2009 on Guidelines and Procedures for Implementation, Development and Reporting Integrated Services in the Field of Investment with aspects of the assessment, include: professionals human resources and meet the reliable competencies, venue of PTSP, facilities and infrastructure of work, information media, mechanism of work in the form of a clear investment guidelines of PTSP, easily understood and easily accessible to investors, the help desk and interconnection of Information Service System and Electronic Investment Services (SPIPISE).

Collection and verification of data and information in site to 130 Providers of PTSP in Capital Investment held by PT. Surveyor Indonesia. 130 Providers of PTSP in Capital Investment consists of 33 Providers of PTSP Provincial Investment (entire province), 53 Providers of PTSP Investment Regency, and 44 Providers of PTSP City Investment. From the verification of data and information in site has been selected 10 nominees Providers of PTSP Investment of the Year 2010 for each Province, Regency, and the City (details attached).

Based on verification of data and information in site, and explanation made by Nominee, Assessment Team consisting of representatives from Secretariat of the Vice President, Coordinating Ministry for Economic Affairs, Ministry of Interior, Ministry of Commerce, Ministry of Administrative Reform and Bureaucratic Reform and the Investment Coordinating Board, has agreed One Stop Service Providers (PTSP) in the Capital Investment of the Year 2010 at the Level of Province, Regency and City as follows:

1) PTSP Providers in Provincial Capital Investment of the Year 2010:

First Rank             : Investment Board of East Java Province

Second Rank        : Regional Investment Board of South Sumatera Province

Third Rank           : Integrated Licensing Service Board of West Java Province

2) PTSP Providers in the Field of Regency Capital Investment of the Year 2010:

First Rank             : Integrated Licensing Board of Sragen Regency – Central Java

Second Rank        : Integrated Licensing Service Board of Sidoarjo – East Java

Third Rank           : Investment Board and One Stop Licensing Service of

Purwakarta Regency – West Java

3) PTSP Providers in Best City Capital Investment in 2010:

First Rank             : Integrated Licensing Service Office of Cimahi – West Java

Second Rank        : Licensing Service Board of Pekalongan – Central Java

Third Rank            : Licensing Service Board and Regional Investment of Bitung City – North Sulawesi

“With existence of PTSP qualifications in the Field of Capital Investment, it will make easier for Capital Investment Coordinating Board in conjunction with the Ministry of Interior and Ministry of Administrative Reform and Bureaucratic Reform to conduct a more directed and focused guidance so that the investment-related services in various regions throughout Indonesia can be repaired and upgraded, “explained the Chairman of Investment Coordinating Board, Gita Wirjawan.
In 2011, BKPM plans will do qualification to the 265 PTSP Providers in Capital Investment Regency/City (which has not been in this qualification in 2010.)

What is the Negative Investment List (DNI)

On May 25, 2010, the Government of Indonesia issued decrees establishing a new list of sectors that were either wholly or partially closed to private foreign and/or domestic investment called the Negative Investment List, known as the acronym DNI.

BKPM has used clear and transparent criteria to account for policy positions. Foreign investors for instance regard the formation of the DNI as an ad-hoc undertaking. But BKPM has clarified its rationale on DNI, including why it is offering a grandfathering provision and a backstop against reversion of ownership splits between foreign and domestic capital for partially closed sectors. BKPM has been focusing its efforts towards the sectors that are considered to have the largest value potential, including courier services, hospitals, creative industry, and education.
Please see below for the relevant Presidential Decrees pertaining to Negative Investment List.

By Linda Silaen and Andreas Ismar


JAKARTA -(Dow Jones)- Indonesia expects private investment to reach around 200 trillion rupiah ($22.4 billion) this year, up around 50% from below $15 billion a year ago, a senior official said Sunday.

“Our investment realization is currently about 50 trillion each quarter,” Gita Wirjawan, head of the Coordinating Board for Investment, or BKPM, told a news conference. “We’ve about 150 trillion in the year to September, so we’re optimistic to reach 200 trillion.”

The forecast was higher than the initial estimate of IDR160 trillion as investments in the Southeast Asia’s largest economy picking up pace. Investments were ranging between IDR42 trillion and IDR56 trillion in each quarter this year, accelerating from between IDR32 trillion and IDR46 trillion quarterly last year.

Wirjawan did not explain the reason for higher investments, but analysts attributed the pick-up on a more integrated information for investors and shorter period for setting up a business on top of country’s abundant natural resources and huge domestic market.

For many years, investors have had to go to numerous ministries or government agencies to request permits, but a little less than a year ago, BKPM introduced a one-stop service for investments that trimmed the time needed for administrative processes from months to days.

BKPM reported that private investment reached IDR149.6 trillion in the January-September period, up by a third from IDR112.1 trillion a year ago.

Total private investment stood at IDR56.7 trillion in the third quarter, compared with IDR45.7 trillion a year earlier, driven by foreign direct investment which stood at IDR40.1 trillion in the July-September period, up 13.6% from IDR35.3 trillion in the previous year.

BKPM doesn’t include investments in mining and gas, banking and financials, and home industry in its reports.

“From our visit to China earlier this month, there were investment commitments of four to five billion dollars,” Wirjawan said, adding “realization usually within the next two to four years.”

PT Tambang Batubara Bukit Asam (PTBA.JK) in August signed a $1.6 billion agreement with the local unit of India’s Adani group, to develop a railway project to transport coal in South Sumatra province, while earlier this week, South Korea’s Posco (005490.SE) and Indonesia’s Krakatau Steel kicked off its joint venture to construct a 3 million tons per year of steel mill by a ground breaking.

Wirjawan, a former JP Morgan banker, is keen to speed up investments further, especially for public-private partnership program to develop country’s creaking infrastructure.

“We’re finalizing procedures to give clearer guidelines. Days of projects idle for years just because of [a lack of clarity] are nearing an end,” Wirjawan was quoted as saying in August.

-By Linda Silaen and Andreas Ismar, Dow Jones Newswires

By Aditya Suharmoko

JAKARTA, Oct 31 (Reuters) – Indonesia reported a 13.6 percent jump in foreign direct investment in the third quarter of 2010, putting it on course for record full-year foreign investment.

Third-quarter foreign investment was 40.1 trillion rupiah ($4.49 billion), taking the total for the first nine months to 111.1 trillion, the country’s investment board, known as BKPM, told a news conference.

“We aim to reach 130 trillion rupiah in foreign investment in 2010. We see the trend is rising,” said M. Yusan, deputy director at the BKPM.

In the first quarter Indonesia received 35.4 trillion rupiah in foreign investment, and in the second quarter it rose to 35.6 trillion. That means full-year investment is set to be well above the 130 trillion target in 2010 if the trend continues.

Foreign direct investment was 100 trillion rupiah in 2007 and 133 trillion in 2008, before dropping to 100 trillion in 2009 as a result of the global financial crisis.

Third-quarter foreign investment was strongest in the housing, mining, transportation, telecommunications, foods and agricultural crops sectors, Yusan said.

Indonesia, southeast Asia’s largest nation, has been a hot destination among portfolio investors in the past 18 months due to its resilient economic growth and increased political stability, but in recent years it has lagged neighbours in attracting FDI.

Higher FDI would help stabilise the nation’s long-term finances and improve its chances of getting an investment grade sovereign rating, a status that would put it on par with BRIC nations such as Brazil and lower government borrowing costs.

In the third quarter this year, Britain (which according to the BKPM definition includes the British Virgin Islands), Singapore and Malaysia were the top three countries investing in Indonesia. The top destination was Banten, followed by Jakarta and West Java.

Indonesia expects total investment of up to 550 trillion rupiah in 2014, supported by infrastructure projects from public-private partnerships.

Indonesia’s finance minister Agus Martowardojo told Reuters last month the government can only fund 35 percent of $140 billion of infrastructure needs in the next five years, leaving it reliant for two-thirds on public-private partnerships.

($1=8935 Rupiah) (Reporting by Adriana Nina Kusuma and Aditya Suharmoko; Editing by Andrew Marshall)

Thursday, October 21, 2010 09:38 AM

Andi Hajramuni, The Jakarta Post, Makassar

The Development and Finance Surveillance Agency (BPKP) will finish its audit over the renovation of residential houses for members of the House of Representatives next week, the agency head said Wednesday.

BPKP chief Mardiasmo said in Makassar that the audit was still ongoing and was expected to be completed by next Monday.

“We will submit the audit result to House’s Household Affairs Committee next week,” he said.

The House committee previously said that they had indication of embezzlement in the renovation of 495 residential houses in Kalibata, South Jakarta, worth Rp 445 billion (US$49.84 million).

The renovation was scheduled to be completed within two months and ended in September, but the contractor failed to meet the deadline.

Press Release
Memorandum of Understanding (MoU) Signing
between BKPM and The US-ASEAN Business Council

Jakarta, October 11 2010 – In an effort to promote infrastructure development in Indonesia, BKPM and the US-ASEAN Business Council today signed a Memorandum of Understanding (MOU) outlining their plans to work together to expand investment through Public-Private Partnerships, as well as explore ways to improve the efficiency and effectiveness of infrastructure development in Indonesia. BKPM was represented by its Chairman, Gita Wirjawan, while US-ASEAN Business Council President Alexander Feldman and President of Caterpillar Asia and Chairman of the US-ASEAN Business Council Infratructure Working Group Kevin R. Thieneman signed on behalf of U.S. Business.

“U.S. business commends Indonesia, and our partners in BKPM in particular, for their impressive focus on infrastructure,” said Kevin Thieneman, President of Caterpillar Asia and Chair of the US-ASEAN Business Council Infrastructure Working Group. “The Council and its members are eager to find ways to match the commitment of the Indonesian government. We look forward to creating dialogues and partnerships focused on developing Indonesia’s comprehensive infrastructure”.

The MOU between BKPM and the US-ASEAN Business Council lays out plans for investment promotion partnerships focused on infrastructure. The Council and BKPM will work together to provide U.S. investors with expanded access to information about potential investments, create information exchanges focused on how to invest in Indonesia, and support BKPM’s effort to better market available opportunities. The partnership will extend to promotional activities such as road shows and forums.

“The cooperation between BKPM and the US-ASEAN Business Council is an important milestone in the effort to attract direct investment into Indonesia. We pursued an agreement with the US-ASEAN Business Council as they are well known as the most effective and trusted advocacy group for U.S. Corporations operating in ASEAN. Last April, the Government of Indonesia also signed an agreement with Overseas Private Investment Corporation (OPIC). I believe that as these partnerships take effect, we will see an increase in US investments into Indonesia,” said Chairman of BKPM, Gita Wirjawan.

The government of Indonesia recognizes the vital role infrastructure plays in development and attracting investment, and is working through BKPM to encourage expanded use of the Public-Private Partnership Program. Indonesia is projected to require at least US$200 billion in infrastructure investment over the next four years. Currently, five projects with a net worth of around US$4.5 billion have been designated as showcase projects.

“Improving Indonesia’s infrastructure is critical to all companies operating in Indonesia, and includes building roads, ports, and bridges, but it also means improving energy security, expanding access to quality healthcare and education, and laying the building blocks for increased use of technology especially through increased access to and speed of Indonesia’s broadband system,” said US-ASEAN Business Council President Alexander Feldman. U.S. companies offer world class technology, equipment and services to help speed the development of the infrastructure projects outlined by President Yudhoyono. We look forward to working with BKPM and the Indonesia government on ensuring American companies and financial services firms are engaged and active in this process were appropriate”.

Also present at the MoU signing were representatives from the U.S. Embassy, representatives from the Coordinating Ministry of Economics, Ministry of Finance, Ministry of National Development Planning, Ministry of Energy and Mineral Resources, Ministry of Transportation, Ministry of Public Works, Ministry of Industry, select local governments (Governor of East Java, Governor of Central Java, Governor of North Sumatra, Governor of Bali, Governor of DKI Jakarta, Governor of West Java, Governor of Banten), senior executives of US-ASEAN Business Council member companies and other stakeholders.

FDI flow are determined by thee concurrent forces :

(i) global saving imbalances, which determine the total official and non-official flows of foreign investment;

(ii) the comparative advatages of countries in particular industries, which make them attractive to investor; and

(iii) the competitive advantages of individual firms, which enable them to pursue globalization strategies.

In the 1960s the United States dominated world FDI. In the 1980s Japan was also prominent. Today there is much wider spread of investor countries from both Western Europe and East Asia. Perhaps more importantly, most industrialised countries are now at the same time both host and home countries. There is now wide recognition of the role and benefits of FDI.

Why Should host countries allow FDI ?

Any country which wants to invest more than it saves must utilise foreign savings to do so. FDI offer a host country advantages over portfolio investment in that it normally bring the transfer of technology and know-how, it reduces vulnerability to downturns in world economic conditions (by tying foreign repayments to ability to pay) and it helps to reduce volatility in financial markets.

The question is frequently debated as to whether it is necessary for a host country to regulate the inflow of FDI. FDI Carries the potential risk that decisions of importance may be made abroad in disregard of the national interest of the host country. In defence of its national interest, a host country may wish to regualte FDI in sensitive sectors (for example, in the defence industry, the media industry and in the ownership of land). Althaough regulation of FDI tends to impose economic cost on the host country by dampening down the overall level of economic acivity and reducing the inflow of foreign technology and know how, many countries prefer to bear these cost in sensitive sectors.

Options for doing business

In debates about FDI, the emphasis is usually on the question of why a firm invests in a given country. This is natural because host countries compete to attract FDI. It is useful, however, to change the emphasis and ask instead the more practical question of why a firm would choose to invest in a given country as its preferred method of doing business there. After all, FDI is not the only boption.

If a firms possesses a competitive advantage, it may adpot a globalization strategy. But it need not choose FDI to exploit this competitive advatage; it could simply license its production technology to a local firm in the host country, or, instead of investing upstream in raw materials or components procurement, the firm could choose instead to negotiate a long term supply contract with a hos country source. (taken from Economic Development, Foreign Investment and the law : R. Pritchard).


Wednesday, 9 June 2010


Government has issued Presidential Regulation No. 36 Year 2010 about the business closed for investment and business opened for investment under certain conditions in investment (Negative Investment List/Daftar Negatif Investasi (DNI)) which changes the Presidential Regulation No. 77 Year 2007 and its amendment at the Regulation No. 111 Year 2007. The release of this current DNI is based on the idea of give simplification, certainty and the investment attraction to the investors as well as to improve the investment climate and to reach the investment target as well as to carry out the Indonesian commitment regarding Asean Economic Community.
Government stated that investment will trigger the growth of economy for about 7% per annum (2010-2014) and it will require investment value of Rp 2.000 trillion per year. The increase in investment will create new jobs to decrease the unemployment to 5 – 6 % as well as to decrease the poverty to 10%.
The simplification, certainty and investment attraction of this current DNI are elaborated as follows:
1)  It is not necessary to establish a new firm or to get a new license for expanding business in the same field of a different location for an existing investment, unless it is ruled by the Decree.

2)  Indirect investment or portfolio of which its transaction is carried out through a local capital market will not be attached to DNI. Indirect investment or portfolio is an investment which is not involved as the controller a company. In other words, buying the stock would be another mean of increasing capital gain.

3)  In the case of merger, acquisition and amalgamation within the same business line, these following limits will be applied:
a.  Limiting foreign capital ownership of the surviving company based on the Agreement Letter of the company.
b.  Limiting foreign capital ownership of the taking over company based on the Agreement Letter of the company.
c.  Limiting the foreign capital ownership of the amalgamation of the company based on the agreement of the company as it was established.

4)  In the case of expanding the business activity within the same field and requiring additional capital through rights issue, foreign investors have the right to order the effect in advance when the local investors are not able to participate in adding on the capital. However, if the addition makes the foreign capital ownership become over the limit as outlined in the Agreement letter of the company, then  within 2 (two) years, it has to be adjusted as to the minimum limit in the Agreement letter through these following ways:
a.  Selling the excess of the foreign capital to the local investors
b.  Selling the excess of the foreign capital through local capital markets
c.  The company buys the excess of the foreign capital and treats it as treasury stocks.
5)  In the case of the investment of which its agreement letter is received by the company before the release of this Presidential Regulation, this current DNI only outlines the investment list closed for business (attachment I) and the list opened with conditions for business (attachment II), it does not apply grandfather clause unless the regulation of this current DNI is more profitable.
6)  The regulation which is less significant that the Presidential Regulation of DNI will be applied as long as it is not against this Presidential Regulation of DNI. Hence when the regulation is hierarchically under the Presidential Regulation and its content is against the Presidential Regulation of DNI, the Regulation is not valid.
7)  The format of the attachment has the list of closed investment list for business and those opened with conditions which is arranged based on the sectors under the business lines for it to be simpler and more comprehensive.
8)  Several sectors give opportunities for foreign capital to more help strengthening the financing capacity for domestics:
a.  Industrial sectors in siklamat and saccharine were previously closed for investment and now they are opened with certain license.
b.  Public works industries in construction have an upgrade of foreign capital ownership from 55% to 67%.
c.  Culture and tourism sectors in filming service (studio of filming, laboratory of film processing, dubbing facilities, printing and film reduplication) is now opened for foreign capital of 49%.
d.  Health sector in hospital services, clinics of specialist doctors clinic laboratories and medical check-up clinic has also an upgrade in foreign capital ownership from 65% to 67% and the location of the activities can now be done all over Indonesia.
e.  Electricity sectors in electricity generators (1-10MW) can be carried out in partnerships, whereas the generators higher than 10 MW, the ownership of foreign capital is maximum 95%.

9)  There will be several adjustments on foreign capital ownership for several sectors and it may be due to the existing of some new decrees or to give wider opportunities for local investors:
a.  Agricultural sectors in the cultivation of principal food crops (corns, soybeans, peanuts, green beans, rice, cassava, sweet potato) with the width of no more than 25 hectares, the ownership of foreign capital is maximum 49% based on the Decree No. 41 Year 2009 regarding the Protection of Sustainable Agricultural Land.
b.  Sectors of Communication and Information in the fields of:

i.  Mailing administration, is conditioned to have special permission and the foreign capital is maximum 49% based on the Decree No. 38 Year 2009 regarding mailing.
ii.  Providing, managing, (operating and renting) and providing construction service for telecommunication towers are 100% local investor ownership.

10) In order to implement Indonesian commitment in investment related to ASEAN Economic Community, this current DNI adds one new attachment (Attachment II.j) which rules out the conditions of foreign capital ownership and/or location for investors from ASEAN countries. These investors are given dispensation in owning capital more than the other foreign investors, for example in the transportation sectors in maritime cargo handling services of which the ASEAN investors are allowed to own foreign capital with the maximum of 60% while the other foreign investors are only allowed for 49%.
 source: Indonesia Investment Coordinating Board

Jakarta, September 19 2010 – The mix of stability, relatively calm politics and solid economic growth is seeing investors clamor to gain a foothold in Indonesia.

Foreigners have been pouring money into Southeast Asia’s emerging giant — the region’s biggest economy — which was largely unaffected by the global financial crisis due to strong domestic demand and limited reliance on wobbly Western export markets.

The Jakarta Composite Index has soared threefold from its low in October 2008, hitting historic highs last week as the country’s improving prospects attracted foreign capital, dealers said.

State firms Garuda Indonesia and Krakatau Steel have IPOs imminent. Both have been in the works for two years, and were postponed late in 2008 because of fears amid the global downturn. But the optimism surrounding them now is a further signal of Indonesia’s rise as an attractive investment destination.

“Stable economic and political conditions in Indonesia continue to be attractive to international investors,” said Gifar Indra Sakti, an analyst with Sucorinvest Central Gani.

The World Economic Forum’s 2010-11 Global Competitiveness Index rankings, released this month, showed Indonesia as the third biggest mover, up 10 notches to 44th place.

A survey of business leaders from 523 companies by UK Trade and Investment and the Economist Intelligence Unit, published last week, put Indonesia fourth behind China, Vietnam and India as a destination for investment capital over the next two years.

“As (Asia’s) third-fastest growing economy, with huge upside potential for our markets, Indonesia is one of those exciting growth stories and our companies are increasingly receiving wider access to financing,” said Gita Wirjawan, chief of the Indonesia Coordinating Investment Board.

Foreign direct investment in the archipelago of 240 million people — the fourth most-populated country in the world — soared 53 percent year-on-year to Rp 35.6 trillion ($4 billion) in the second quarter.

But analysts said concerns about corruption and the rule of law made equities — rather than direct investments in plant and infrastructure — a more attractive entry point.

Equities are seen as the easiest way to get into the Indonesian market, with investors regularly citing legal uncertainty, chronic corruption and poor infrastructure as obstacles to direct investment in the mainly Muslim country. In a major review of Indonesia’s financial stability, the International Monetary Fund warned last week that foreign investors would be cautious until more is done to fight corruption and improve the rule of law.

Around 20 local companies will have raised more than $5 billion on the share market by the end of the year if current plans come to fruition. Many say they want to pay off debt and cash up for expansion.

Fourth-ranked lender Bank Negara Indonesia is targeting 10 trillion rupiah in a December rights issue, while another state-owned bank, Mandiri, is marketing a Rp 14 trillion issue in the same month.

Indofood Sukses Makmur, the world’s biggest instant noodle maker, is expecting to raise about $700 million from offering 20 percent of its subsidiary PT Indofood CBP in October. The offering is nine times oversubscribed, banks said on Friday, and will be the biggest Indonesian IPO in two years, after coal miner Adaro Energy raised $1.3 billion in 2008.

State-owned Krakatau Steel, the country’s biggest steel producer, aims to list in November.

“Hopefully we can get fresh funds up to $600 million. We plan to use the funds to expand our business and modernize our machinery,” said Fazwar Bujang, Krakatau’s president director.

Another state-owned enterprise, flagship carrier Garuda, also plans its listing in November, aiming to raise around 300 million dollars to strengthen its capital structure and help fund six new Airbus A330-200 aircraft valued at $1.15 billion.

The airline — which was on an EU safety blacklist from 2007 to 2009 — has announced aggressive expansion, codenamed “Quantum Leap,” planned to run through to 2014.