Linda Yulisman, Jakarta – Business groups have demanded the government to put local interests as their top priority when it revises the negative investment list (DNI) by giving them ample room and opportunities to grow.
In revising the list, the government plans to open 6 out of 20 sectors that are currently closed to foreign investment. It also plans to raise the percentage of foreign ownership in a wide array of sectors, including logistics, pharmacies and the tire industry.
This has met objections from local business associations. Indonesia Logistics and Forwarders Association (ALFI) executive director Theo Kumaat said he hoped the government would retain foreign ownership at 49 percent, not more.
The current rule helps local business players develop in line with the government's commitment to empowering the national logistics system (Sislognas).
"We hope logistics services that most local firms can handle, such as warehousing, will be given to domestic players," Theo told The Jakarta Post on Monday. "Foreign investment should focus more on capital-intensive, technology-intensive and labor intensive business," he said.
According to him, business players from Southeast Asia can be exempted from this regulation considering Indonesia's participation in the regional pact on liberalizing logistics services.
Under the Association of Southeast Asian Nations (ASEAN) Framework Agreement on Services, Indonesia should gradually open its logistics services sector to regional players starting this year by allowing a maximum 70 percent foreign ownership in logistics firms.
However, the commitment has yet to come into force since the technical regulation to implement it is still under deliberation.
Indonesian Pharmaceutical Association (GP Farmasi) advisory board chairman Anthony Charles Sunarjo echoed Theo's concerns, saying that the government should keep dominant local ownership in pharmaceutical firms producing generic medicines.
Currently, foreign drug makers can only acquire a 25 percent stake in domestic firms, leaving the majority share open for local players. Currently, local pharmaceutical firms control 80 percent of the overall domestic generic medicine market.
"An increase of foreign ownership may apply to pharmaceutical firms that carry out research to produce patented medicines as they require huge investment," Anthony said, adding that these firms would bring advanced technology and provide wider access to new kinds of medicines for Indonesian consumers.
Meanwhile, Indonesian Tire Producer Association (APBI) chairman Aziz Pane also raised his concerns for the further opening of the domestic crumb rubber industry.
He said the industry should be closed for new investment from both domestic and foreign investors, but this policy could be reviewed once the supply of raw material already exceeded the installed capacity of the industry.
"At present, existing producers are struggling because the raw material supply cannot meet the demand of new crumb rubber plants. An increase of plants will add to existing idle capacity," he said.
The shortage of rubber supply partly stems from the low productivity of local rubber plantations, which can only generate 1 million tons of natural rubber per hectare, compared to 1.7 million tons in Thailand and 1.5 million tons in Malaysia.
Surging rubber prices in the past few years has lured investors to invest massively in the crumb rubber plants. In 2011, there were 145 crumb rubber plants nationwide with installed capacity of 4.3 million tons, but the raw material supply totaled only 3 million tons.
It resulted in the decline of utilization of installed capacity from 73 percent in 2008 to 60 percent in 2011, leading to idle capacity that pushes up processing costs.
In response to the industry's concerns, the Investment Coordinating Board (BKPM) supervision and implementation deputy chairman Azhar Lubis said that in revising the list, the government already took into account input from local business players. "However, we certainly cannot accommodate all input because different business sectors may suggest different suggestions," he said in a text message.