Implementation of the Presidential Regulation on the negative list ( presidential regulation no. 39 of 2014 )

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1 Invest in remarkable indonesia Invest in indonesia Invest in remarkable indonesia Invest in remarkable indonesia Invest in Invest in remarkable indonesia Invest in indonesia Invest in remarkable indonesia Invest in remarkable indonesia Invest in indonesia remarkable indonesia able indonesia Invest invest in Invest in remarkable indonesia Invest in Implementation of the Presidential Regulation on the negative list ( presidential regulation no. 39 of 2014 ) Indonesia Investment Coordinating Board September by Indonesian Investment Coordinating Board. All rights reserved

2 Presidential Regulation No. 39 of 2014 The president 's regulations consists of : 12 articles, and 2 attachments : 1. List of business fields closed to investment 2. List of business fields open, with condition, to investment : a. Reserved for micro, small, medium enterprises and cooperatives b. Partnership c. Foreign capital ownership d. Certain location e. Special licenses f. 100% domestic capital g. Foreign capital ownership and location h. Special license and foreign capital ownership i. 100% domestic capital and special license j. Foreign capital ownership and/or location requirements, for ASEAN investors Indonesia Investment Coordinating Board 2

3 Implementation of Negative List on Investment Licensing New Expansion Merger Acquisition Negative List PRINCIPLE LICENSE Operational Licenses Regional Licenses Fiscal Incentives Negative List BUSINESS LICENSE COMMERCIAL PRODUCTION/OPERATION Negative List 3

4 The Most Widely Implemented Articles Article 3 - negative list principle Article 5 - application of negative list for public company Article 8 - obligation to comply with other regulations Article 9 - grand father clause principle 4

5 article 3 :. business fields not listed in the attachment I and II, are open for investment without conditions implementation of article 3: two parameters in the attachment of Negative List, that are business field and KBLI (business field classification number) the presidential regulation stipulates which business fields are closed for investment and which are open with the requirements the referenced parameter is the field of business if the proposed business field is not listed in the negative list despite the KBLI listed, BKPM can approved the proposal 5

6 article 3 :. business fields not listed in the attachment I and II, are open for investment without conditions article 8 : the provision does not reduce the obligation to comply with the terms and conditions of the ministry and local government regulation. Example : business field - five star hotel - is open without condition taking into account the saturation of the location in the district for hotel operations, the local government closed the area for the hotel business activity 6

7 article 5 :. the provision is not applicable for indirect investment or portfolio, in which the transactions were being made through domestic capital markets.. Implementation of article 5 : referred as indirect investment and portfolio in article 5 is public shares which the transactions carried out in the domestic capital market Law No.25/2007 on investment, stipulates that PMA is a company wholly owned by foreign parties or a combination between foreign and domestic parties Public Company classified as a foreign direct investment (PMA) company, if the share holders which listed in the company deed consist of public shares and individual foreign shareholder and/or foreign entities or PMA company Public Company which classified as PMA company obliged to comply with the provisions of the negative list 7

8 EXAMPLE PT. ABC Tbk (PMA), approval license in 2000, business field : restaurant, shareholder structure in the company deed : public shares 40%, Mr. Yamazaki 20% (Japanese) and Mr. Tono 40% (Indonesia) presidential regulation no. 39/2014, --- business field restaurant open with condition max foreign shareholder 51% If Mr. Tono sell his 40% share, and the share structure of the company become : Alt I : Mr. Yamazaki share 20%, public shares increase become 80% (public buy Mr.Tono share) BKPM can approve this composition, based on article 5 the provision is not applicable for public shares, as long as the foreign share is not more than 51% Alt II : Mr. Yamazaki 60% ( he buy Mr.Tono shares), public shares remain 40% BKPM will not approve this composition, because the foreign share is more than the max share in the negative list regulation (51%) Indonesia Investment Coordinating Board 8

9 article 9 :. the provision does not apply to investments that have been approved before the presidential regulation was stipulated, as stated in the company license, unless such provision is more beneficial for the investment. implementation of article 9 : Expansion grandfather clause applied if expansion will be done in the same business field Merger grandfather clause applied for surviving company it means that the surviving company is possible to maintain the percentage of foreign share Acquisition grandfather clause applied for company that being acquired it means that the acquired company is possible to maintain the percentage of foreign share 9

10 Impact of Divesting Program : Example: PT ABC (PMA), business field trading (distributor) approval license in % foreign shareholder with obligation for divesting, in 2013 PT. ABC conducting the divestment obligation, the current share holder structure become Mr. Yamazaki (Japanese) 90% and Mr. Tono (Indonesia) 10% presidential regulation no 39/2014, business field trading (distributor) max foreign share holder 33% Alt I : On september 2014, Mr. Tono want to sell his 10% share, Mr.Yamazaki or other foreign (individual/entities) or other PMA company, is not possible to buy the share, since the max foreign share for distributor only 33%, Alt II : on september 2014, Mr. Yamazaki want to sell his 90% share other foreign (individual/entities) or other PMA company, possible to buy all Mr. Yamazaki shares, since the max foreign share for PT ABC (grand father clause) is 90% Indonesia Investment Coordinating Board 10

11 Trading Business Activities trading scope activities are export, import and main distributor (max foreign share for distributor activity 33% - KBLI 00000) the activity of distributor company is to distribute commodities / products in the country through the non direct distribution channel, activities can be include with after-sales services and/or packaging products, but still have to obtain license to conduct activities other than distributors KBLI means the provision of negative list regulation is applied to distribute all types of commodities or products grandfather clause is possible to implement when a distributor company need to add types of commodities modern stores supermarket, department store, hypermarket, wholesale (requirement based on minimum trading area) Multi Level Marketing (MLM) (max foreign share 95%) Indonesia Investment Coordinating Board 11

12 Domestic Distribution Regulation Overseas Indonesia importer API-P API-U non direct distribution direct distribution manufacturing distributor MLM modern stores manufacturing agent retailer end consumer Indonesia Investment Coordinating Board 12

13 Domestic Distribution Regulation Manufacture Company Raw Material Manufacture Company Finish Product Distributor Agent End Customer 13

14 implementation of on-line system Tracking system 2013 December 2014 June : applied on-line tracking system 2013 : mandatory on-line master list : mandatory online for Principle License application (before establish company) existing companies are required to create a folder in the BKPM data base the folder must be filled with all administration document of the company such as company deed, BKPM and Ministry licences, Regional Government licenses etc and should always be updated by the company gradually will be mandatory online application for other licenses 2016 : BKPM will only receive application for all types of license issued by BKPM through online, no more face to face services in the front office area 14

15 THANK YOU 15

16 INVESTOR RELATION UNIT Lestari Indah