Indonesia Opens Wider for Foreign Investment

JAKARTA — Indonesia has raised the foreign ownership limit on certain sectors, such as agriculture and health care, in a bid to lure investments, according to a presidential decree.

According to the decree obtained by Dow Jones Newswires Wednesday, the government is allowing foreigners to hold up to 49% stake in individual companies in the staple food plantation industry. Up until now, only domestic investors have been allowed to enter this area.

The government is raising the ceiling for foreign ownership in hospitals to 67% and is opening doors to facilities across the country. Previously, foreigners could hold up to 65% of hospitals in certain major provinces only.

Indonesia, however, is still retaining a ban on foreign investment in telecommunication towers despite strong interest from overseas investors.

The sprawling archipelago has drawn more investment interest of late because of its strong growth prospects and relatively stable government. Some investors have tipped Indonesia to rank beside the burgeoning BRIC countries of Brazil, Russia, India and China due to its big market potential and rich natural resources.

However, bureaucratic red tape, corruption and overlapping regulations have hobbled foreign investment. In 2009, actual foreign direct investment in Indonesia dropped about 20%,to $10 billion, from a year earlier amid the global economic crisis.

The Bin Laden Group from the Middle East last year cancelled a plan to invest around $1 billion in a food estate project in Papua province because the government planned to cap its share of ownership in the project at 49%.

The opening up of the hospital sector could pave way for some regional healthcare providers, such as Parkway Holdings Ltd. of Singapore, to enter the world’s fourth most populous country, analysts said.

The decree is effective immediately, but detailed rules haven’t yet been set.

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