In furtherance of Indonesia’s commitment to welcome the implementation of the ASEAN Economic Community (AEC) in 2015, Presidential Regulation No. 39 of 2014 regarding the list of business fields closed to investment and business fields open, with conditions, to investment (2014 DNI) continues to treat foreign investors from ASEAN countries differently to investors from other countries. This was also true of the previous negative investment list under Presidential Regulation No. 36 of 2010 (2010 DNI).
Both the 2014 DNI and its predecessor allow investors from ASEAN countries to hold up to 60 percent share ownership in Indonesian shipping companies engaged in sea transportation business activities with foreign routes. Supposedly bringing a breath of fresh air to Indonesia’s investment climate, this provision, bearing in mind the prevailing laws and regulations in the field of shipping, begs one question: how effectively is it being implemented?
Under the Shipping Law, an Indonesian shipping company may be in the form of a joint venture company between an Indonesian person and/or legal entity and a foreign entity, owning at least one Indonesian-flagged vessel measuring at least 5000 gross tonnage. As regulated under Article 158 of the Shipping Law, such a joint venture must be majority owned by the Indonesian person and/or entity. The 2014 DNI, as its predecessors did, specifies that the allowed foreign ownership in a joint venture shipping company may not exceed 49 percent, with the exception, starting with the 2010 DNI, that ASEAN investors may hold up to 60 percent ownership in Indonesian shipping companies engaged in sea transportation business activities with foreign routes.
Despite the fact that the drafting of the 2014 DNI took into consideration recommendations from the different ministries, the treatment given to investors coming from ASEAN countries in terms of share ownership in an Indonesian shipping company apparently failed to heed the currently applicable requirements and limitations, and it remains to be seen when, or if, MOT Reg. 13 will be amended to accommodate the foreign ownership allowed under the 2014 DNI for ASEAN investors.
SSEK Legal Consultants
14th Floor, Mayapada Tower
Jl. Jend. Sudirman Kav. 28
Jakarta 12920, Indonesia
Tel: (62) 21 521 2038 / Fax: (62) 21 521 2039