Indonesia could be a good place to invest if the government figured itself out. One commenter in the Jakarta Post 3 years ago said that while Indonesia attempts to attract foreign investment, it creates a mixed message by imposing extra regulations on foreigners, that the immigration department and trade department already take care of. A recent article in the Bali Advertizer comments on the new restrictions on foreign investment.
On July 4th the Indonesian government announced that it was instigating a 49% foreign ownership limit on certain business sectors, with other limits ranging from 50-100% in others. We all know about Hugo Chavez in Venezuela, nationalising foreign businesses. This may bring a smile to nationalists, but hurt the country long term.
Many countries restrict foreign ownership in certain industries for example newspapers. The latest rules mean foreigners can only own 65% of a mobile phone company, down from 95%, insurance to 80%, hospitals to 65% and many types of construction to 55%. Other sectors of business including education, airports, ports, and mulit-media were down to 49%. Compared to the US, this is still very generous, but some people are not so happy. Many senior foreign and domestic buisness people have said these new rules will disuade people from new investment in Indonesia.
In April 2007 a new investment law was passed to encourage foreign investment. Lingering uncertainty over legal issues and labor laws have meant this has not helped much. Indonesia’s trade minister, Mari Pangestu said the government wanted to ‘put everything under the light and start addressing it.’ The head of the European Chamber of Commerce said the thought nationalisitic bureaucrats had won out over more realistic politicians looking to improve the investment climate.
In my opinion its not a problem having rules limiting foreign investment in key areas, as long as the rules are clear to protect the investor. Getting your foreign foreign business partner deported has in the past been one tactic people have used. Even huge companies have to deal with some nonsense. People say that when Carrefour bought the lkand for their massive supermarket, the king of Denpasar approached them saying it was actually his land and asked to be paid again. Who knows the real story but in Indonesia fact is often stranger than fiction.
The new rules do not affect businesses already operating in Indonesia or ones that are currently obtaining paperwork. Twenty years ago in Bali many exapts were deported for legal foreign investment, many returning to become successful business people.
