That in order to implement the provisions of Article 12 paragraph (4) and Article 13 paragraph (1) of Law No. 25/2007 concerning Capital Investments, it is necessary to stipulate a presidential regulation on criteria and requirements for formulation of closed and conditionally opened business lines in the investment sector;
THE PRESIDENTIAL REGULATION ON CRITERIA AND REQUIREMENTS FOR FORMULATION OF CLOSED AND CONDITIONALLY OPENED BUSINESS LINES IN THE INVESTMENT SECTOR
Referred to in this presidential regulation as:
(1) All business lines, excluding the business lines declared closed and opened conditionally, are opened for investments.
(2) The closed business lines are certain business lines which cannot be exploited by investors as investment activity.
(3) The conditionally opened business lines are certain business lines which can be exploited as investment activity under certain requirements.
Stipulation of criteria and requirements for formulation of the closed and conditionally opened business lines aims at:
(1) The lists of closed and conditionally opened business lines constitute reference of investors in choosing business lines of investments.
(2) The choice of business line as intended in paragraph (1) becomes requirements for the establishment of business entity having statutory body by investors, especially for foreign investors before undertaking investment activity in Indonesia.
Stipulation of the closed and conditionally opened business lines adopts the following basic principles:
(1) The simplification as intended in Article 5 sub-paragraph a means that the business lines declared closed and opened conditionally are effective nationwide and simple as well as limited to business lines related to national interests so as to become a small part of the whole economy and small part of every sector in economy.
(2) The compliance to international agreements or commitments as intended in Article 5 sub-paragraph b means that the business lines declared closed and opened conditionally may not contravene Indonesia's obligations contained in the international agreements or commitments that had already been ratified.
(3) The transparency as intended in Article 5 sub-paragraph c means that the business lines declared closed and opened conditionally must be clear, detailed, measurable and with no multi-intrepretation, as well as based on certain criteria.
(4) The legal certainty as intended in Article 5 sub-paragraph d means that the business lines declared closed and opened conditionally may be unchangeable, except by a presidential regulation.
(5) The unity of Indonesia's territory as the sole market as intended in Article 5 sub-paragraph e means that the business lines declared closed and opened conditionally may not discourage the free flow of goods, services, capital, human resources and information within the territory of the Unitary State of the Republic of Indonesia.
Formulation of criteria for the closed and conditionally opened business lines is based on the following considerations:
Business lines closed for investments, either foreign and domestic investments, are stipulated on the basis of Health, Safety, Defense and Security, Environment and Morality/Culture (K3LM) Criteria and other national interests.
The K3LM criteria as intended in Article 8 can be specified, among others:
Business lines declared closed are effective nationwide throughout the territory of the Republic of Indonesia, for both foreign and domestic investments.
Criteria for stipulation of the conditionally opened business lines are, among others:
(1) The conditionally opened business lines consist of:
(2) The opened business lines as intended in paragraph (1) sub-paragraph a only can be exploited on the basis of consideration about economic reasonability and feasibility to protect UMKMK.
(3) The opened business lines as intended in paragraph (1) sub-paragraph b consist of reserved and not-reserved business lines on the basis of consideration about business feasibility.
(4) The opened business lines as intended in paragraph (1) sub-paragraph c provide restriction of capital ownership for foreign investors.
(5) The opened business lines as meant in paragraph (1) sub-paragraph d provide restriction of administrative territory for investors.
(6) The opened business lines as meant in paragraph (1) sub-paragraph e can be in the form of recommendations from government and non-government institutions/agencies authorized to supervise a business line, including referring to provisions of legislation stipulating monopoly or the requirement for cooperating with state-owned enterprise in the business lines.
(7) Technical and non-technical requirements for investors so as to be able to operate/produce commercially are regulated in Guidelines on Procedures for Licensing Business Lines stipulated by technical ministers/leaders of institutions having authority related to the business lines.
The government stipulates business lines reserved for UMKMK and opene~ business lines on condition of partnership.
(1) Business lines reserved for UMKMK are stipulated in accordance with legislation.
(2) The business lines as intended in paragraph, (1) are busines lines which constitute-business lines reserved for UMKMK without a must to become part of the list of opened business lines with requirements for business licenses reserved for UMKMK.
(3) In case of business lines based on consideration about reasonability and feasibility of "economies of small scale" being exploited by UMKMK, the business lines become part of the list of opened business lines with the requirement for business lines reserved for UMKMK.
(4)The list of business lines reserved for UMKMK as intended in paragraph (1) is stipulated on the basis of recommendations of technical ministers related to the business lines, after coordinating with the State Ministry for Cooperatives, Small and Medium Scale Businesses by observing priorities of UMKMK development programs.
(1) Business lines opened on condition of partnership constitute businesses executed in the form of cooperation between UMKMK and large-scale businesses, accompanied by the fostering and development by large-scale business having mindful of mutual necessary, mutual strengthening and mutually beneficial principles.
(2) The business lines requiring partnership between large-scale investors and UMKMK as intended in paragraph (1) can be executed by model of core plasm, sub-contractor, general trade, agency and other form without change in ownership of UMKMK as well as being implemented on the basis of written agreement.
(3) The written agreement as intended in paragraph (2) is a requirement for large-scale investors so as to be able to set up partnership in the reserved business lines.
(4) Besides partnership in the business lines reserved for UMKMK as intended in paragraph (1), partnership can be executed by large-scale investors and UMKMK in business lines according to their business licenses as licensing requirement for operating/producing commercially.
CHAPTER IX
STANDARD CLASSIFICATION OF INDONESIA'S BUSINESS LINES
The closed and conditionally opened business lines are formulated by using the Standard Classification of Indonesia's Business Lines (KBLI) in the most detailed level made possible by the availability of KLBI or by using combination of other classification methods in the most possible detailed level.
CHAPTER X
PROCEDURES FOR FORMULATION
(1) The lists of the closed and conditionally opened business lines are evaluated and improved periodically in accordance with developments of economy and national interests on the basis of studies, findings and recommendations of investors.
(2) Formulation of the closed and conditionally closed business lines is under coordination of the Office of the Coordinating Minister for Economy, later stipulated in a presidential regulation.
(3) Ministers or leaders of institutions concerned recommend closed and conditionally opened business lines along with supporting reasons to the Coordinating Minister for Economy by using the criteria and considerations on the basis of this presidential regulation.
(4) The Office of the Coordinating Minister for Economy sets up a team to judge, formulate, evaluate and perfect the lists of the closed and conditionally opened business lines.
(5) The Investment Coordinating Board is responsible for coordinating the implementation of this presidential regulation.
The presidential regulation comes into force as from the date of stipulation.
Stipulated in Jakarta
On July 3, 2007
THE PRESIDENT OF THE REPUBLIC OF INDONESIA
Signed
DR. H. SUSILO BAMBANG YUDHOYONO