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Tim Burroughs AVCJ

Foreign investors will be able to take larger
stakes in Indonesias power, advertising and
pharmaceuticals sectors as part of efforts to
boost the countrys slowing economy. The chang-
es require formal presidential endorsement
before they can come into effect.
Following modifications to the "negative invest-
ment list" that specifies areas in which foreign
participation is banned or restricted, the limit on
investment in pharma companies will rise from
75% to 85%.
Overseas players will also be able to full own-
ership of power plant projects constructed as
public-private partnerships, where participation
is currently capped at 95%. Investment in ad-
vertising agencies by groups from member
countries of the Association of Southeast Asian
Nations will increase to 51% from 49%.
However, a proposal to allow foreign investors
to fully operate airports and ports was not car-
ried forward. They may only own up to 49%.
"The commitment is to maintain Indonesia's eco-
nomic growth and anticipating a slowdown in
the global economy by encouraging investment,
particularly in domestic and foreign investment,"
Hatta Rajasa, Indonesia's chief economic minis-
ter said, Reuters reported.
The country's current account deficit has contrib-
uted to the rupiah falling 21% against the US
dollar in 2013 to a five-year low of INR12.260
on December 23. There are concerns that the
impending reduction in the US monetary stimu-
lus, plus uncertainty ahead of next year's elec-
tions, will lead to further foreign outflows.
The World Bank said in its most recent quarterly
review of the Indonesian economy that growth is
likely to slow in 2014 - 5.3% is the expected
base case, down from 5.6% in 2013 - and re-
versing the trend requires additional and more
focused policy responses.
"The monetary policy and exchange rate ad-
justments seen in 2013 are broadly positive for
macroeconomic stability, however, they also
carry costs and bring with them risks," the
World Bank said. "Therefore, moving into 2014
the recent, necessary focus on near-term macro-
economic stability should continue to be aug-
mented with more steps to support a virtuous
cycle of strong investment, including foreign
investment, and output growth."
It recommended supporting exports to capital-
ize on greater international competitiveness
generated by the weaker rupiah, increasing
investment efficiency, and supporting, and en-
hancing, foreign direct investment inflows.

29 December 2013, written by Tim Burroughs


Indonesia eases foreign investment restrictions
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