INVESTMENT IN DISTRIBUTION SECTOR

Investment in Distribution Sector 

(January 2017)

Under the investment negative list which is currently regulated in the President Regulation No. 44/2016 dated 12 May 2016 (“Negative List 2016”), business sectors in the field of products distribution and retail through modern stores are open for investment with foreign ownership which is restricted up to certain percentage only.

1. Distribution

Before enactment of Negative List 2016, foreign investment in the field of the following distribution business sectors were restricted up to a maximum of 33% foreign ownership, but it has been a little bit relaxed under the Negative List 2016 becoming as follows:

a. General distributor (KBLI 0000)
 
- Foreign shares ownership in the distribution  business sector is restricted up to 67% if it is not affiliated to the products. No specific explanation what “affiliate to products” means under Negative List 2016. In practice, following BKPM’s verbal interpretation, “not affiliated to products” referred to under such Negative List 2016 means such company will distribute products other than products of its affiliate/parent company which is a foreign investment company in Indonesia

- Distribution business sector which is affiliated to products is not listed on the Negative List 2016 thus it opens for 100% foreign ownership. In practice, following BKPM’s verbal interpretation, such 100% foreign owned company which is engaged in the distribution must distribute only products of its affiliate/parent company which is a foreign  investment manufacturer established in Indonesia.

b. Medical device distributor (KBLI  46693)

- Foreign shares ownership in the distribution of medical device is allowed up to 49% and provided that  a specific permit from the Ministry of Health is obtained.

2. Modern  Stores

a. Department Stores   (KBLI 47191)

Before enactment of Negative List 2016, department store business sector with retail space less than 2000 sqm was closed for foreign investment, now department store business sector with retail space of 400-2000 sqm and located in a mall is opened for foreign investment with foreign ownership up to 67%; certain particular permit is required to be obtained from the Minister of Trade.

b. Supermarket (KBLI 47111)

The same as previous Negative List,  under on the Negative List 2016 supermarket business sector with retail space less than 1200 sqm and mini market with retail space less than 400sqm are still reserved for domestic investment only. Foreign investment are permitted for supermarket business sector which retail space are 1200sqm or more, mini market which retail space are 400sqm or more. Relevant technical regional regulation applicable in the location of such supermarket, minimarket or department store shall also be applicable.

 

3. Importer

Import business sector is not listed on the Negative List 2016. Thus in theory it opens for foreign investment. Minister of Trade Regulation Number 22/2016 stipulates that to distribute the imported goods to retailer, business license as distributor is required.

 

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