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FDI: Entry and ownership rule
On 29 September 2014, the Indonesian House of Representatives passed a new law concerning the plantation industry.
According to the passed law, every new foreign endeavor must first obtain a letter of acceptance from the Ministry of Agriculture before buying shares in Indonesian plantation companies. The law will also apply to existing companies once their period of licensing rights to cultivate land (HGU; usually spanning over 35 years) runs out.
With the new regulations, the 'plantation product processing businesses must source at least 20 per cent of the total required raw materials from their own plantations' (Lexology, 10.10.2014, 'New Indonesian Plantation Law passed').
The draft bill included a lowered maximum foreign ownership share from 90% to 30%. However, this clause was eventually deleted and will be decided at a later stage through a government regulation.
As the official document has not yet been made public online, it is unclear when exactly the law came into force. However, it is known that plantations have five years to adopt the new provisions.
The list of affected trading partners is based on the list of FDI flows over 10 million USD in 2013 in the sector "Agriculture, Hunting, and Forestry", as calculated by the Indonesian central bank.
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