‘NEGATIVE’ & ‘POSITIVE’ INVESTMENT LISTS: A COMPARATIVE ANALYSIS BETWEEN CHINA & INDONESIA

A. Background

I. Opening-up and Reform & FDI in the People’s Republic of China (“China”)

For numerous decades, China's economic development has been one of the most essential elements of the global economy. The repeated opening of China's economy to inbound foreign direct investment has been one of the most essential components of China's economic openness and reforms, which began at the end of the 1970s. It was intended that not only finance would be brought in, but also know-how, technology, and management skills. Foreign corporations were expected to give links to promote China's exports and outside investments, as well as models of how world-class businesses ran and handled competition to encourage Chinese firms to develop. These incentives remained constant over time, while new ones arose. When China joined the World Trade Organization (“WTO”), for example, it exchanged increased openness to foreign enterprises in a variety of areas in exchange for access to worldwide markets.1

While China has been increasingly open to international investment over time, it is still far from being fully open. Although the number of industries where foreign investment is encouraged or authorized has increased, there are still a large number of areas where foreign investment is limited or forbidden. This is in line with the belief that China has always considered foreign investment openness as a means to a goal rather than an aim in and of itself. And, rather than a local economy controlled by foreign enterprises, a strong Chinese economy with stronger Chinese firms prospering domestically and abroad is a crucial component of that aim.2

Since the beginning of the reform period, China's policies on foreign investment have changed significantly. This is reflected in the policy and legal system, the industries in which foreign investment is promoted and discouraged, the geographies within China that have been opened to international investment, and the administration of foreign investment laws and regulations. Since the beginning of China's reform and opening program, the goal of Chinese leaders has been to reap the benefits of inward foreign investment while ensuring that the Chinese government maintains control, that foreign companies' ability to dominate China's economy is limited, and that foreign investment has a positive impact on Chinese companies. After all, most of China's previous experience with foreign investment has been one of skepticism and caution.3

The trade-offs inherent in this strategy have evolved through time, resulting in a dynamic environment in which foreign businesses seek to profit from their presence in China, while China seeks to maximize the advantages and minimize the possible drawbacks of foreign investment. The upshot of this step-by-step strategy to openness has been a remarkable increase in inbound foreign direct investment, which has risen from essentially nil in 1980 to approximately USD 1.6 trillion in cumulative inward foreign direct investment (“FDI”) by 2014. China's approach may be observed not only in the increase in foreign FDI, but also in the distribution of that FDI by sector and province, which has followed China's policies, as well as economic possibilities. China has attempted to manage one of the largest economic changes in history while aiming to reduce social upheaval and avoid the problems that have previously been linked with foreign investment in China.4

II. Sector-Based Investment Policies

The Interim Provisions on Guiding Foreign Investment and the Catalogue for the Guidance of Foreign Investment Industries (the “Catalogue”) were the first legislation to 'guide' FDI into China by industry, both of which were released in 1995. The Catalogue, which has been updated several times, is a good place to start if you're thinking about investing in China. According to the Laws on Guiding the Orientation of Foreign Investment, a distinct set of provisions enacted in conjunction with China's WTO admission, FDI entering China has been divided by sector since 2002 into ‘encouraged,’ ‘permitted’, ‘restricted’, and ‘prohibited’ categories. Wholly foreign-owned firms, equity joint ventures, and cooperative joint ventures are authorized in ‘encouraged’ industries. Unless prohibited by other laws and regulations, industries not listed are 'permitted' and typically available to FDI via the same vehicles. FDI is subject to stringent assessment and clearance on a case-by-case basis in ‘restricted’ industries, with potential limits on company vehicles and foreign control. FDI is not authorized in ‘prohibited’ industries. There are other catalogues for specialized industries and geographical locations. Additional limits frequently exist for investments within the ‘encouraged’ and ‘permitted’ categories, and authorities might ban investment for reasons that are not listed in the catalogues. Furthermore, the catalogues include restrictions that some investments be made in specified ways (for example, as a domestic-foreign equity joint venture) and/or equity limitations on the foreign shareholder's share of the investment.5

From the above, it can be seen that China maintains two types of lists, namely negative (prohibited/restricted) and positive (permitted/encouraged) lists. It is interesting to compare the situation in China with the current legal framework in Indonesia, which is another country notable for its notorious and stringent negative list.

B. Negative and Positive Lists in China

Under Chinese legal framework, there are multiple regulations/measures governing negative and positive lists. Among others, they are:

1. Catalogue of Projects Encouraged for Foreign Investment (2020 Version), issued by the National Development and Reform Commission and the Ministry of Commerce [鼓励外 商投资产业目录（2020年版] (“Encouragement List”)6;
2. Catalogue of Industries Encouraged for Foreign Investment in the Central and Western Regions of China (2020) [中西部地区外商投资优势产业目录] (“Central and Western Regions’ Encouragement List”)7;
3. Special Administrative Measures for the Access of Foreign Investment (2021), issued by the National Development and Reform Commission and the Ministry of Commerce [外 商投资准入特别管理措施(负面清单)(2021年版)] (“Foreign Investment Negative List”)8;
4. Market Entry Negative List (2022 Version) issued by the National Development and Reform Commission and the Ministry of Commerce [国家发展改革委 商务部关于印发《市场准入负面清单（2022年版）》的通知 发改体改规〔2022〕39 号] (“Market Access Negative List”)9;
5. Special Administrative Measures for the Access of Foreign Investment in Pilot Free Trade Zones (2021) issued by the National Development and Reform Commission and the Ministry of Commerce [自由贸易试验区外商投资准入特别管理措施(负面清单) (2021年版)] (“Pilot FTZ Foreign Investment Negative List”)10; and (f) Special Administrative Measures for Cross-Border Service Trade at Hainan Free Trade Port (2021) issued by the Ministry of Commerce [海南自由贸易港跨境服务贸易特别 管理措施(负面清单)(2021年版)] (“Hainan Foreign Investment Negative List”)11.

C. Differences between Various Lists in China

The Market Access Negative List includes industries where Chinese and foreign companies are forbidden or limited from investing without specific regulatory approval. Chinese and foreign companies would be treated equally in industries on the Market Access Negative List in terms of investment restrictions and approval requirements. The Foreign Investment Negative List applies solely to foreign investors in China (including foreign-invested companies (FIEs)) and covers additional industries that are prohibited or restricted to such investors, in addition to those included on the Market Access Negative List. The Foreign Investment Negative List is in effect all throughout the country. Similarly, the Pilot FTZ Foreign Investment Negative List applies solely to foreign investors and only to their investment operations in China's free trade zones. Foreign investors have more access to free trade zones in China than in other regions of the country. Since 2017, the negative listings have been updated on a yearly basis. China's negative list regulatory structure is built around the Market Access Negative List, the Foreign Investment Negative List, and the Pilot FTZ Foreign Investment Negative List. Sectors that are not on these lists are available for investment.12

D. Negative and Positive Lists in Indonesia

Under Indonesian legal framework, there are multiple regulations/measures governing negative list. Among others, they are:

1. Law No. 25 Year 2007 on Investment as amended by Law No. 11 Year 2020 on Job Creation (“Job Creation Law”) (“Investment Law”);
2. Presidential Regulation No. 10 Year 2021 on Investment Business Sectors as amended by Presidential Regulation No. 49 Year 2021 (“PR 10/2021”).

The Investment Law and PR 10/2021 set out lists of business sectors that are:

1. wholly prohibited for investment (both domestic and foreign)13:

• cultivation and industry of class I narcotics;
• all forms of gambling and/or casino activities;
• catching fish species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);
• utilization or extraction of coral and utilization or extraction of corals from nature which are used for building materials/lime/calcium, aquariums, and souvenirs/jewelry, as well as live or dead coral from nature; (v) chemical weapons manufacturing industry;
• industrial chemical industry and ozone depleting material industry;
• Alcoholic Beverage Industry (KBLI14 11010), Alcoholic Beverage Industry: Wine (KBLI 11020), and Malt Containing Beverage Industry (KBLI 11031); and

2. exclusively carried out by the Central Government of Indonesia15;

3. open for investment:

• priority16 (tax incentives17, tax holiday18 , investment allowance19);
• allocated for20/in partnership21 with cooperatives and MSMEs22;
• specific requirements23; and
• other categories24.

In Indonesia, items (1) to (3) above are put together in a so-called “priority” list or “positive list”, rather than “negative list”.25 However, according to Bill Sullivan, the first “Positive Investment List” in Indonesia is essentially simply a game of semantics and marketing “spin.” This is because the list of business sectors that are no longer open to investment is now governed by a different piece of law, the Job Creation Law, rather than PR 10/2021.26 Furthermore, as can be seen in the table below under section F, there are 3 (three) lists under PR 10/2021 which mean that it is inaccurate to refer to all 3 (three) lists as the “Positive Investment List”.

E. Comparison between Prohibited, Restricted & Encouraged Sectors for Investment in China & Indonesia

1. Wholly Prohibited for Both Domestic & Foreign Investment: China and Indonesia have a specific list of industries that are prohibited for both domestic and foreign investment. By comparing the two countries’ list, it can be seen that China focuses on prohibiting sectors relating to technology, financial industry, Internet, news and media whereas Indonesia focuses on narcotics, gambling, alcoholic beverages, and nature. The difference stance between the two countries reflects the background of China and Indonesia. China is a country that is not really concerned about religious values, whereas Indonesia is a country that ensures its legislations adhere with religious values and principles. Narcotics, gambling, and alcoholic beverages are industries that are not in line with religious values and principles, especially from the viewpoint of Islamic teachings. The sectors prohibited in China also reflect the reality wherein China is a country that is highly developed and highly dependent on technology, especially Internet and mobile payment services.
2. Restricted Sectors for Foreign Investment: In Indonesia, the restricted sectors for foreign investment mainly concern industries that pertain to Indonesia’s heritage, culture and religious traditions (e.g. traditional clothing, traditional medicine, Umrah and Hajj travel) and transport (e.g. air and sea transportation). The sectors restricted for foreign investment in Indonesia are reflective of the richness of cultural traditions in Indonesia as well as the will of the Government of Indonesia to protect small cooperatives and MSMEs scattered all over Indonesia, mainly outside of Java. Meanwhile, in China, restricted sectors for foreign investment mainly concern (i) agriculture, forestry, animal husbandry, fisheries, (ii); (iv) wholesale and retail trade; (v) transportation, warehousing and postal industry; (vi) Information transmission, software and information technology services; (vii) leasing and business services; (viii) scientific research and technical service industry; (ix) education; (x) health and Social Work; and (xi) culture, sports and entertainment.
3. Encouraged Sectors for Foreign Investment: In Indonesia, the focus is on industries relating to manufacturing and construction whereas in China, agriculture, forestry, animal husbandry and fishery; mining industry; manufacturing; electricity, heat, gas and water production and supply industry; transportation, warehousing and postal industry; wholesale and retail trade; information transmission, software and technical services; leasing and business services; scientific research and technical service industry; water conservancy, environment and public facilities management industry; education; health and social work; and culture, sports and entertainment industry.

F. Comparison Table between Chinese and Indonesian Negative & Positive Lists

Below is a table setting forth a comparison between the negative and positive/encouragement lists in China and Indonesia, we can see that there are some similarities and differences, as follows:

G. Conclusion

Both China and Indonesia are countries protecting several of its key industries from any investment at all, and some other industries from foreign investment. There are similarities in terms of how China and Indonesia both have positive (encouragement) lists affording incentives for foreign investors to invest in certain regions/sectors and negative lists providing restrictions for foreign investors to invest in certain sectors the Governments in both countries want to protect from competition with foreign investment. However, there are also differences between how China and Indonesia organize the negative and positive lists. For example, China separates the negative list for market access, foreign investment and foreign investment in certain free trade zones and China has different encouragement/positive lists for the national and regionspecific ones. On the other hand, Indonesia does not have disparate negative and positive lists categorized based on regions/zones. Another point that worth mentioning is that both countries have different priorities in terms of which industries to protect from foreign investment because both countries are in different stages of development and come from different cultural and religious backgrounds. Interestingly, despite the many similarities between the Chinese and Indonesian negative and positive investments lists, there is no publicly available information that suggests that both countries are inspired from each other’s measures.?

Footnotes:

1. Michael J. Enright, “Developing China: The Remarkable Impact of Foreign Direct Investment”, New York: Routledge, 2017, p. 8.
2. Ibid.
3. Ibid., pp. 8 – 9.
4. Ibid.?
5. Ibid., pp. 14 - 15.
6. (i) agriculture, forestry, animal husbandry and fishery; (ii) mining industry; (iii) manufacturing; (iv) electricity, heat, gas and water production and supply industry; (v) transportation, warehousing and postal industry; (vi) wholesale and retail trade; (vii) information transmission, software and technical services; (viii) leasing and business services; (ix) scientific research and technical service industry; (x) water conservancy, environment and public facilities management industry; (xi) education; (xii) health and social work; and (xiii) culture, sports and entertainment industry.
7. Central and Western Regions referred to in the Central and Western Regions’ Encouragement List are: (i) Shanxi Province, (ii) Inner Mongolia Autonomous Region, (iii) Liaoning Province, (iv) Jilin Province, (v) Heilongjiang Province, (vi) Anhui Province, (vii) Jiangxi Province, (viii) Henan Province, (ix) Hubei Province, (x) Hunan Province, (xi) Guangxi Autonomous Region, (xii) Hainan, (xiii) Chongqing; (xiv) Sichuan Province, (xv) Guizhou Province, (xvi) Yunnan Province, (xvii) Tibet Autonomous Region, (xviii) Shanxi Province, (xix) Gansu province, (xx) Qinghai Province, (xxi) Ningxia Autonomous Region, (xxii) Xinjiang Autonomous Region (including Xinjiang Production and Construction Corps).
8. Sectors restricted for foreign investment are: (i) agriculture, forestry, animal husbandry and fishery; (ii) mining industry; (iii) manufacturing, electricity, heat, gas and water production and supply industry; (iv) wholesale and retail trade; (v) transportation, warehousing and postal industry; (vi) information transmission, software and information technology services; (vii) leasing and business services; (viii) scientific research and technical service industry; (ix) education; (x) health and social work; and (xi) culture, sports and entertainment industry.?
9. Sectors prohibited for domestic and foreign investments according to the Market Access Negative List are: (i) Prohibitive provisions related to market access that are clearly established by laws, regulations, and decisions of the State Council; (ii) Products, technologies, processes, equipment and behaviors that are explicitly eliminated and restricted by the national industrial policy; (iii) Various development activities that do not meet the construction requirements of the main functional area; (iv) It is prohibited to carry out financial-related business activities in violation of regulations; (v) It is prohibited to carry out Internet-related business activities in violation of regulations; and (vi) It is prohibited to conduct news and media related business in violation of regulations. Sector that are restricted for domestic and foreign investments according to the Market Access Negative List are: (i) agriculture, forestry, animal husbandry and fishery; (ii) mining industry; (iii) manufacturing; (iv) electricity, heat, gas and water production and supply industry; (v) construction industry; (vi) wholesale and retail trade; (vii) transportation, warehousing and postal industry; (viii) accommodation and catering; (ix) information transmission, software and information technology services; (x) financial industry; (xi) real estate; (xii) leasing and business services; (xiii) scientific research and technical service industry; (xiv) water conservancy, environment and public facilities management industry; (xv) residential services, repairs and other services; (xvi) education; (xvii) health and social work; (xviii) culture, sports and entertainment industry; (xix) the “Catalogue of Investment Projects Approved by the Government (2016 Version)” clearly implements the approval system (except for foreign investment and overseas investment); (xx) licensing matters in the Catalogue of Prohibited Licenses for Internet Market Access; and (xxi) others;
10. Sectors restricted for foreign investment in Pilot FTZ are: (i) agriculture, forestry, animal husbandry, fisheries, (ii) mining, (iii) electricity, heat, gas and water production and supply; (iv) wholesale and retail trade; (v) transportation, warehousing and postal industry; (vi) Information transmission, software and information technology services; (vii) leasing and business services; (viii) scientific research and technical service industry; (ix) education; (x) health and Social Work; and (xi) culture, sports and entertainment.
11. Sectors restricted for foreign investment in Hainan FTZ are: (i) agriculture, forestry, animal husbandry and fishery, (ii) construction, (iii) wholesale and retail, (iv) transportation, warehousing and postal services, (v) information transmission, software and information technology services, (vi) finance, (vii) leasing and business services, (viii) scientific research and technical services, (ix) education, (x) health and social work, and (xi) culture, sports and entertainment
12. WilmerHale, “China’s New Negative List for Foreign Direct Investment”, 11 January 2022, https://www.wilmerhale.com/en/insights/client-alerts/20220111-chinas-new-negative-list-for-foreign-direct-investment
13. Article 12(2) of Investment Law.
14. KBLI stands for Klasifikasi Baku Lapangan Usaha Indonesia (in English, Indonesian Standard Industrial Classification). The latest version is KBLI 2020 and it can be found under Central Statistics Agency Regulation No. 2 Year 2020 on KBLI.
15. Article 2(3) of PR 10/2021: “[a]ctivities of a service nature or in the context of defense and security that are strategic in nature and cannot be carried out or cooperated with other parties.”?
16. According to Article 4(4) to (6) of PR 10/2021, investors investing in the prioritized business sectors shall be given fiscal and non-fiscal incentives. Fiscal incentives shall consist of income tax for investment in certain business fields and/or in certain areas (tax allowance), reduction of corporate income tax (tax holiday), or reduction of corporate income tax and facilities for reducing net income in the context of investment as well as reduction of gross income in the context of certain activities (investment allowance), including: a) reduction of net income on new Investments or business expansion in certain Business Fields which are labor-intensive industries; and/or b) reduction of gross income for the implementation of work practices, apprenticeship and/or learning activities in the context of fostering and developing certain competency-based human resources; and customs incentives in the form of exemption from import duty on imports of machinery as well as goods and materials for construction or industrial development in the framework of investment. Non-fiscal incentives shall consist of ease of business licensing, provision of supporting infrastructure, guarantee of energy availability, guarantee of availability of raw materials, immigration, employment, and other facilities in accordance with the provisions of laws and regulations.
17. Sectors granted tax allowance according to PR 10/2021 are: (i) agricultural crops; (ii) agriculture of annual crops; (iii) agriculture of ornamental plants and plant breeding; (iv) livestock; (v) forest management; (vi) catch fisheries; (vii) cultivation fisheries; (viii) coal mining; (ix) natural gas mining and geothermal power enterprises; (x) mining of iron sand and iron ore; (xi) mining of metal ore which does not contain iron, excluding precious metal ore; (xii) mining of precious metal ore; (xiii) fish and water biota processing and preservation industry; (xiv) fish and water biota processing and preservation industry; (xv) fruits and vegetable processing and preservation industry; (xvi) vegetable and animal oil and fat industry; (xvii) milk processing industry, milk and ice cream products; (xviii) rice, flour and starter milling industry; (xix) other food industry; (xx) spinning, weaving and textile improvement industry; (xxi) other textile industry; (xxii) manufacture of finished garments and equipment, non-finished garments from fur leather; (xxiii) knitted and embroidery/ embroidery clothing industry; (xxiv) footwear industry; (xxv) manufacture of coal products; (xxvi) manufacture of oil refining products; (xxvii) chemicals industry; (xxviii) other chemical goods industry; (xxix) artificial fiber industry; (xxx) industry of pharmaceutical, chemical drug products and traditional medicine; (xxxi) industry of rubber and rubber goods; (xxxii) manufacture of goods from plastic; (xxxiii) industry of glass and glass products; (xxxiv) industry of other non-metal minerals; (xxxv) iron and steel base metal industry; (xxxvi) manufacture of precious base metals and other non-ferrous base metals; (xxxvii) manufacture of other metal goods and services for manufacturing metal goods; (xxxviii) industry of electronic components and boards; (xxxix) computer and equipment industry; (xl) communication equipment industry; (xli) electronic audio and video equipment industry; (xlii) manufacture of measuring equipment, testing equipment, navigation and control equipment and time measuring equipment; (xliii) manufacture of photographic equipment and non-optical instruments; (xliv) manufacture of electric motors, generators, transformers and electricity control and distribution equipment; (xlv) battery stone and electric accumulators industry; (xlvi) industry of cables and equipment; (xlvii) manufacture of electrical lighting equipment (including non-electrical lighting equipment); (xlviii) household equipment industry; (xlix) manufacture of machinery for general purposes; (l) manufacture of machinery for special purposes; (li) industry of four or more motor vehicles; (lii) manufacture of four or more motor vehicles and trailer and semi trailer manufacture; (liii) manufacture of parts and accessories of four or more motor vehicles; (liv) ship and boat building industry; (lv) other transportation equipment industry not classified somewhere else; (lvi) furniture industry; (lvii) industry of jewelry and valuable goods; (lviii) industry of children's toys and toys; (lix) other processing industry not classified anywhere else; (lx) other processing industry not classified anywhere else; (lxi) electricity; (lxii) natural and artificial gas procurement and distribution; (lxiii) water treatment; (lxiv) wastewater collection; (lxv) treatment and waste disposal; (lxvi) remediation and other waste and waste management activities; (lxvii) rail transport; (lxviii) transport supporting activities; (lxix) programming activities, computer consultation and related activities; (lxx) owned or rented real estate and tourism area; (lxxi) cultivation fisheries; (lxxii) coal mining; (lxxiii) fish and water biota processing and preservation industry; (lxxiv) other food industry; (lxxv) manufacture of paper and paper goods; (lxxvi) industry of rubber and rubber goods; (lxxvii) provision of short-term accommodation; (lxxviii) sports activities; and (lxxix) other recreational activities.
18. Sectors granted tax holiday according to PR 10/2021 are: (i) iron and steel base metal industry; (ii) manufacture of precious base metals and other non-ferrous base metals; (iii) manufacture of oil refining products; (iv) manufacture of coal products; (v) chemicals industry; (vi) industry of pharmaceutical, chemical drug products and traditional medicine; (vii) industry of iradiation, electromedical and electrotherapy equipment; (viii) industry of electronic boards and components; (ix) manufacture of electric motors, generators, transformers and control and distribution equipment; (x) manufacture of machinery for public purposes; (xi) manufacture of machinery for special purposes; (xii) industry of four or more motor vehicles; (xiii) manufacture of parts and accessories of motor vehicles with four or more wheels; (xiv) other transportation equipment industry not classified anywhere else; (xv) industry of locomotives and train carriers; (xvi) irrigation, communication and waste network construction; (xvii) aircraft industry and equipment; (xviii) industry of rubber and rubber goods; (xix) repair of manufactured metal products, machinery and equipment; (xx) manufacture of paper and paper goods; (xxi) road and railway construction; (xxii) other civil building construction; (xxiii) rail transport; (xxiv) data processing, hosting and related activities; web portal; and (xxv) satellite telecommunication activities.
19. Sectors granted investment allowance according to PR 10/2021 are (i) fish and water biota processing and preservation industry; (ii) fruits and vegetable processing and preservation industry; (iii) milk processing industry, milk and ice cream products; (iv) rice, flour and starter milling industry; (v) other food industry; (vi) industries of spinning, weaving and textile improvement; (vii) manufacture of finished garments and equipment, non-finished garments from fur leather; (viii) knitted and embroidery/ embroidery clothing industry; (ix) manufacture of leather and leather goods, including artificial leather; (x) manufacture of paper and paper goods; (xi) manufacture of rubber and rubber goods; (xii) manufacture of goods from plastic; (xiii) industry of other non-metal minerals; (xiv) manufacture of other metal goods and services for manufacturing metal goods; (xv) computer and equipment industry; (xvi) electronic audio and video equipment industry; (xvii) manufacture of electric motors, generators, transformers and electricity control and distribution equipment;(xviii) household equipment industry; (xix) manufacture of machinery for public purposes; (xx) manufacture of machinery for special purposes; (xxi) furniture industry; (xxii) industry of jewelry and valuable goods; and (xxiii) children's toys and toys industry.
20. According to Article 5(2) of PR 10/2021, they are business activities that do not use technology or that use simple technology; business activities that have specific processes, are labor intensive, and have a special cultural heritage that is passed down from generation to generation; and/or operating capital does not exceed Rp. 10,000,000,000.00 (ten billion rupiah) excluding the value of land and buildings.
21. According to Article 5(3) of PR 10/2021, they are business sectors that are mostly operated by cooperatives and MSMEs; and/or business sectors that are encouraged to enter the supply chain of large enterprises.
22. Sectors that are reserved for cooperatives and MSMEs according to PR 10/2021 are, among others: (i) agriculture, (ii) forest product collection, (iii) fish processing industry, (iv) soybean processing industry, (v) brown sugar industry, (vi) processed food industry, (vii) salt processing industry, (viii) cracker industry, (ix) fabric weaving industry; (x) the batik industry, (xi) the embroidery/border fabric industry, (xii) the traditional clothing industry, (xiii) the woven goods industry, (xiv) the wood carving craft industry, (xv) the traditional medicine industry, (xvi) the rubber fumigation industry, (xvii) the clay/ceramic household equipment industry, (xviii) the cutting tool industry and hand tools for agriculture, (xix) general equipment industry, (xx) traditional musical instrument industry, (xxi) electricity supply of less than 1MW, (xxii) building construction with simple technology, (xxiii) telecommunications construction with simple technology, (xxiv) decoration with simple technology, (xxv) retail trade, (xxvi) lodging services, (xxvii) engineering with simple technology, (xxviii) laboratory testing with simple technology, and (xxix) simple clinical services.
23. According to Article 6(1) of PR 10/2021, they are (i) investment sectors with investment requirements for domestic investors; (ii) investment requirements with restrictions on foreign capital ownership; (iii) investment requirements with special permits; or (iv) other investment requirements are business sectors that are limited and closely monitored and regulated in separate laws and regulations in the field of control and supervision of alcoholic beverages (According to Article 6(3)(a) of PR 10/2021, they are: Wholesale of Alcoholic Beverages (importers, distributors, and sub distributors) (KBLI 46333); Retail Trade on Liquor or Alcoholic Drinks (KBLI 47221); and Street Retail Trade on Liquor or Alcoholic Drinks (KBLI 47826). Sectors that are 100% prohibited for foreign investment are (i) coffee processing industry that has obtained geographical indications; (ii) stamp batik industry; (iii) wood building goods industry; (iv) traditional cosmetics industry; (v) industry of raw materials for traditional medicine for humans; (vi) traditional medicine product industry for humans; (vii) industry of phinisi, outrigger, and other wooden boats with traditional designs; (viii) special Umrah and Hajj travel agency activities (must be a Moslem); (ix) art studio; (x) publication of newspapers, magazines, and bulletins (press) (100% domestic investment during incorporation and maximum 49% foreign investment (through capital market) for business expansion); (xi) Private Broadcasting Institution (100% domestic investment during incorporation and maximum 20% foreign investment for business expansion); and (xii) Subscription Broadcasting Agency (100% domestic investment during incorporation and maximum 20% foreign investment for business expansion). Sectors restricted for foreign investment of maximum 49% are (i) manufacture of weapons and ammunition, war vehicles, defense radar for weapons systems, warships, and military aircraft (in case of strategic interests, more foreign ownership is allowed with the approval of the Minister of Defence); (ii) liner and tramper domestic sea transportation for passengers; (iii) domestic sea transportation for tourism; (iv) pioneer domestic sea transportation for passengers; (v) domestic sea transportation of liners and trampers for goods; (vi) domestic sea transportation for special goods; (vii) pioneer domestic sea transportation for goods; (viii) domestic sea transportation for people's shipping; (ix) liner and tramper overseas sea transport for goods; (x) overseas sea freight for special goods; (xi) public ferry transportation between provinces; (xii) inter-provincial pioneering ferry transportation; (xiii) public crossing transportation between districts/cities; (xiv) pioneer crossing transportation between districts/cities; (xv) public ferry transportation within districts/cities; (xvi) river and lake transportation for passengers with fixed and regular routes; (xvii) river and lake transportation for passengers with irregular and irregular routes; (xviii) transportation of rivers and lakes with irregular and irregular routes for tourism; (xix) river and lake transportation for general goods and/or animals; (xx) river and lake transportation for special goods; (xxi) river and lake transportation for dangerous goods; (xxii) scheduled commercial air transportation; (xxiii) domestic unscheduled commercial air transportation; (xxiv) air transport activities (Foreign capital is a maximum of 49% and national capital owners must remain larger than the total foreign capital owners (single majority); and (xxv) courier activity.
24. According to Article 3(2) of PR 10/2021, business activities under this category are open for investment to all investors.
25. See Elucidation to Article 12(3) of Investment Law; BKPM, “Indonesia’s Investment Recovery Strategy”, last accessed on 18 April 2022, https://www2.investindonesia.go.id/en/article-investment/detail/indonesias-investment-recovery-strategy; BKPM, “Priority Investment List”, last accessed on 18 April 2022, https://www.bkpm.go.id/en/publication/detail/news/priority-investment-list.
26. Bill Sullivan, “New Negative Investment List – Definitely Less Negative but Still Not Truly Positive, Coal Asia Magazine, February – March 2021 Edition, p. 12.
27. Deacons, “China Announced the 2019 Negative Lists and Catalogue of Encouraged Industries for Foreign Investment”, 22 July 2019,?https://www.deacons.com/2019/07/22/china-announced-2019-negative-lists-and-catalogue-of-encouraged-industries-for-foreign-investment/.
28. See Nos. 167 – 183, 203-206, and 224-227 in Annex I of PR 10/2021.
29. Article 8(1) of PR 10/2021. For more information about Indonesia’s SEZ, please see Republic of Indonesia National Council for Special Economic Zone, “Indonesia Special Economic Zones”, last accessed on 18 April 2022, https://kek.go.id/?