ASEAN Regulatory Brief: Increased Foreign Ownership Opportunities in Indonesia and Plenary Session Takeaways from the Philippines

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Indonesia: Government to Permit Full Foreign Ownership in E-commerce

Rudiantara, the Minister of Communications and Informatics recently said that the government would allow 100 percent foreign ownership in local e-commerce businesses. Reports indicate that the new regulations will apply to prominent e-commerce corporations, which have received previous rounds of funding and are valued at over US $ 1 billion. The government will not allow foreign funding for small and medium enterprises as well as startups as they believe such firms still require protection.

Industry experts believe that the new regulation will make Indonesia an attractive destination for foreign investors. A number of ASEAN member states have more liberal policies for foreign investment in e-commerce. The recent changes in Indonesia will attempt to align the economic environment of the country with the rest of the ASEAN member states.

The new regulations are a part of wider reforms that the government has undertaken to accelerate the growth of e-commerce in the country. Rudiantara said that restrictions on foreign investment in e-commerce were impeding the sector’s growth potential. In addition, significant interest from foreign investors and corporations prompted the government to make the regulatory change.

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Indonesia: New Law Allows Foreigners to Own Landed houses

Indonesia President Joko Widodo signed a new regulation on 22 December 2015, which will allow foreigners to own landed houses in Indonesia for up to at least 80 years.  Effective from December 28th, the regulation states that a foreigner can buy a landed house under the right-of-use category initially for up to 30 years. Ownership may then be extended by a further 50 years, thus reaching a total of 80. 

Usage also extends to legal heirs; however, ownership rights cease to exist if an expatriate leaves Indonesia to reside in another country. In such scenarios, ownership rights need to be transferred to another eligible individual. If an owner does not transfer rights of ownership within a year leaving the country, the government has the right to confiscate the house.

Government officials have stated that the new law helps to ensure stability for foreigners with vested interests in property ownership. Dezan Shira & Associates concurs with these claims and projects that this change will provide greater legal assurance to expatriates interested in real estate investment within the country. 

By allowing long-term ownership, recent changes eliminate short-term logistical concerns that foreign property owners faced in the past. Furthermore, new regulations repeal an old law that restricted foreigners from purchasing property under the right-to-use category valued at under US $ 720,000. Prior to recent changes, the law had faced widespread criticism for setting price thresholds that did not accurately reflect the market conditions.


Philippines: Senate to Pass Key Bills During January Plenary Session 

Franklin Drilon, President of the Philippine Senate, indicated on January 17th that the Senate is set to pass several major bills during its January plenary session. The Salary Standardization Law IV, Customs and Tariff Modernization Act (CTMA), and the Foreign Ownership Restrictions Act are all bills that will affect investors within the country if passed.

The CTMA will ensure full automation of customs procedures. The law will ensure more transparency and lesser possibility for graft by minimizing human intervention. The CTMA will also strengthen the Customs regime, aid risk mitigation, and assist revenue collection in customs. 

The Salary Standardization Law IV aims to make current salaries for the private and public sector uniform. The government wants to attract the best talent from the private sector to ensure efficiency within the public sector. Local experts believe that the law will make the labour supply market highly competitive and both private and public corporations will have to offer higher remuneration to attract the best employees. 

The Foreign Ownership Restrictions Act plans to remove the ban on foreign ownership restrictions for financial institutions. The new regulation will apply to financing, lending and investment houses. Industry experts believe that the change in the law will make Philippines a preferred destination for foreign investors among ASEAN countries.


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