Government Launches the 10th Economic Policy Package

Coordinating Minister for the Economy Darmin Nasution accompanied by related ministers and high-ranking officials announced the 10th Economic Policy Package (11/1) (Picture: Public Relations Office/Jay)

The Government accounced the 10th Economic Policy Package focusing on protection improvement for Micro, Small, Medium Enteprises and Cooperatives (UMKMK) as well as the change of Negative Investment List (DNI)

Coordinating Minister for the Economy Darmin Nasution said that in this Economic Policy Package, the Government adds 19 reserved business sectors for UMKMK in the revision of Presidential Regulation Number 39 of 2014 on List of Closed and Open Business Sectors with Conditions in Capital Investment Sector or known as Investment Negative List (DNI).

“The 19 business sectors are included in the activities or business services/construction consulting services using simple/medium technology and or small/medium risks and/or the value of the work is less than Rp 10 billion,” Darmin said to the journalists at the Presidential Office, Jakarta, on Thursday (11/2) afternoon.

He mentioned that the previous DNI required 55% foreign capital in several business sectors, such as pre-design and consulting services, architecture design services, contract administration services, other architecture services, etc.

In addition, there are 39 business sectors reserved for UMKMK. The value of the work increases, which previously was Rp 1 billion in maximum, now it is up to Rp 50 billion. The activities included are construction services such as construction works for commercial and health facility buildings.

To broaden the business sectors of UMKMK, Darmin added, there should be reclasification by simplifying the business sectors. For example, 19 business services/construction consulting services become one type of business. “Therefore, the business sectors reserved for UMKMK could be more simple, from 139 become 92 business activities,” he said.

Meanwhile, for the partnership, which purpose is to establish cooperation between Domestic Capital Investment (PMDN), Foreign Capital Investment (PMA) and UMKMK, the business sectors increases from 48 to 62, so in total there are 110 business sectors.

The business sectors are, among others: germination plantation business with an area of 25 hectares or more, retails via mail order or the internet, and such.

The UMKMK can still invest the capital, either in business sectors that are not included in the DNI or in open business sectors with certain conditions.

Has been Discussed Since Last Year

Minister Darmin asserted that the change of the DNI has been discussed since 2015 and it has gone through dissemination, public test, and consultation with ministries/institutions, business people, and other stakeholders.

Beside improving protection for UMKMK, the Minister added, the change of the DNI is also done to cut the chain of economic centralization which so far enjoyed by certain group. Thus, the prices, for example the medicine and health equipments prices, can be cheaper, to anticipate the competition era, particularly Indonesia’s competition in ASEAN Economic Community.

Beside opening job and strengthening the capital to build, the purpose of the change is also to support national companies to compete and be stronger in domestic and global market.

“This policy is not liberalization, but it is an effort to develop the potential of national geopolitics and geo-economy, by, among others, supporting UMKMK and national companies to improve creativity, synergy, innovation and capacitiy to absorb new technologies in this openness era.

According to Darmin, in this new policy, there are 35 business sectors, among others, crumb rubber and cold storage industries; tourism (restaurants, bars, cafes, recreational businesses, arts, entertainments, sports stadiums); film industries; market places which value are more than Rp 100 billion; establishment of telecommunication devices testing institution; toll road business; management and harmless waste disposal; and the industry of medicine raw materials, that excluded from the DNI.

Another important issue is the loss of recommendations of 83 business sectors, among others, hotels (non star, one star, two stars); motels, recreational businesses, arts and entertainments; billiards, bowlings, and golf courses.

The revision of DNI also opens 20 business sectors for foreign parties with certain amount of shares, which previously, the Domestic Capital Investment(PMDN) was 100%. They are, among others, health supporting services (67%), land public transport (49%), film industry including film circulation (100%), installation of high voltage/extra high voltage electric power (49%).

The changes of Foreign Capital Investment (PMA) shares composition in DNI are:

1. 30% for 32 business sectors, among others, holticulture cultivation, germination holticulture, etc. It does not change because of the mandate of the Law.
2. 33% for 3 business sectors, such as distributors and warehousing increase up to 67%, and cold storage increases up to 100%
3. 49% for 54 business sectors, where 14 of them increase to up 67% (such as: job trainings, tourism bureau, golf courses, air transport supporting services, etc); and 8 business sectors increase up to 100% (such as: sports center, film processing laboratory, crumb rubber industry, etc); and 32 business sectors are still 49%, such asacupuncture services facility.
4. 51% for 18 business sectors, where 10 of them increase up to 67% (such as: private museums, caterings, conventions, exhibitions, and incentive travels, etc); and 1 business sector increases up to 100%, i.e. restaurant; while 7 business sectors are still 51%, for example natural tourism business.
5. 55% for 19 business sectors, where all sectors increase up tp 67%, such as business services/construction consulting services with value of work is more than Rp 10.000.000.000,00.
6. 65% for 3 business sectors, where these 3 business sectors increase up tp 67%, for example integrated telecommunication network and services.
7. 85% for 8 business sectors, where 1 sector increases up to 100%, that is industry of medicine raw materials; and other 7 sectors do not change because of the Law, for example, leasing business.
8. 95% for 17 business sectors, where 5 sectors increase up to 100% (such as toll road business, establishment of telecommunication devices testing institution/laboratory test, etc); and 12 business sectors are still 95% because of the Law, for examle plantation business with an area of 25 hectares or more that is integrated with processing unit with same capacity or exceeds certain capacity, etc.(FID/EN/ES)(MMB/YM/Naster)