Foreign Investment Restrictions across ASEAN: An Overview of the Region’s “Negative Lists” – Part One

Posted by Reading Time: 6 minutes

By: Steven Elsinga

In this first installment of a multi-part series, ASEAN Briefing takes a closer look on the restrictions in place on FDI throughout ASEAN, with a focus on Indonesia, the Phillipines, and Cambodia.

In a region as diverse as ASEAN, the foreign investment climate inevitably differs from state to state. Many have rolled out beneficial policies to attract more foreign investors, hoping that increased capital inflows and business activity will stimulate the economy.

At the same time however, national governments are often wary of ceding control to foreign entities over industries they deem to be sensitive. In this article, we are providing an overview of the restricted and prohibited sectors in each of the ASEAN countries.


For the full English text, click here.

Indonesia prohibits all investment, local or foreign, in:

  • The cultivation of marihuana
  • Catching endangered marine life, or removing coral
  • Chemicals that are dangerous to the environment
  • Gambling and alcoholic beverages
  • Public and historical museums
  • Flight navigation, shipping telecommunication, terminals for land passenger transport and motor vehicle tests

There are also areas where foreign investment is prohibited, or where the equity percentage held by foreign entities is capped.

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In agriculture, there is a cap of 49 percent on food seeds and crops, such as rice, soybeans and corn. The cap is higher (95 percent) for a number of crops that are largely exported, such as cashew nuts, coconuts, palm oil and tobacco. Horticulture of fruits and vegetables is limited to 30 percent. Genetic research and engineering of plants is restricted to 49 percent. The restrictions reflect a concern for food safety.

The processing of sugar has a maximum of 95 percent foreign ownership, and requires additional licenses.

Foreign investment in logging is outright prohibited.

Many oil and gas activities are subject to caps, or exclude foreign investment altogether. For instance, the installation of pipelines is left to local companies. Offshore oil and gas drilling requires a 25 percent Indonesian shareholding, but onshore drilling is exclusively for local entities, as are most supporting services.

The operation of power plants and electricity distribution is largely open to foreign investors – only 5 percent of equity needs to remain in Indonesian hands. The same goes for the provision of drinking water, waste disposal and the operation of toll roads.

Construction is more restricted. Here, a foreign player may in many cases only hold two thirds of the equity in a construction company. Construction related services, like structural design, civil engineering and architecture is limited at 55 percent.

The provision of security services is capped at 49 percent foreign equity, and requires a license from the police.

Many types of retail businesses may only be carried out by Indonesian companies.

Distribution, warehousing and cold storage are capped at foreign ownership of one third of the shares.

With the exception of opinion polling (55 percent), most types of surveys need to be carried out by Indonesian invested companies. These include geological surveys, quality surveys, certification surveys etc.

Foreign-invested companies may also not engage in the rental of machinery, such as the types used for land transportation, construction, agriculture, welding or metal processing.

Many tourism and leisure related businesses are capped at roughly 50 percent equity. These include hotels, bars, restaurants, cafes and travel bureaus.

Film production, editing, distribution and cinematic screenings are the exclusive domain of Indonesian-invested companies. For some ancillary services to film making, foreign investment up to 49 percent is allowed.

Transport too, is capped at 49 percent for most types. This includes activities ranging from port management, air travel booking services and passenger ferries to the construction of terminals. Land transport is off limits to foreign investment altogether.

The financial sector is more liberalized. Here, most activities are around 80 percent foreign equity. These are on insurance, leasing, venture capital and actuarial services. Pension funds, smallholder credit and foreign exchange trading are the only activities that mandate 100 percent local capital.

Many staffing services allow foreign capital up to 49 percent, but the placement of Indonesian workers abroad needs to be done by fully Indonesian owned companies.

Lastly, a significant number of restrictions are placed on healthcare and medicine. Pharmaceutical production is capped at 85 percent foreign equity, but for the wholesale trade of pharmaceuticals, foreign investment is not allowed. General patient care, including dentistry is reserved for local companies, but for specialist care, investment is often allowed with some restrictions. In the management of hospitals, foreign investment is allowed up to 67 percent.

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The Philippines

The Philippines released its latest Negative List on foreign investment in May 2015. Click here for the English version.

As can be seen, the Philippines imposes fewer restrictions on foreign investment compared to Indonesia.

Foreign investment is prohibited in mass media, private security, small-scale retail trade (capital below US $2.5 million), the manufacturing of nuclear and chemical weapons, firecrackers, small-scale mining, and the utilization of marine resources the country’s territorial seas, and inland waters.

In addition, foreign individuals may not engage in certain professions, such as law, radiology, pharmacy, criminology and forestry.

The strictest limitation is on the operation of a private radio network, which has a maximum of 20 percent foreign equity. The slightly higher maximum of 25 percent applies to recruitment of staff and the construction and repair of public buildings and defense related structures.

Advertising is limited to 30 percent foreign shareholding.

The highest cap is at 40 percent. This maximum applies to the ownership of condo units and private land, exploration and development of natural resources, operating public utilities and educational institutions, rice and corn processing and wholesaling, deep sea commercial fishing, and supplying goods and materials to local government or state-owned enterprises.

A separate section of the Negative list imposes a 40 percent maximum on sectors that are limited due to reasons of public safety and morals; and the protection of domestic SMEs.

These include the production of firearms and ammunition, ingredients that can be used in explosives and telescopic sights for guns. If the production, storage or distribution of goods that require clearance from the Department of Defense, this too is subject to the 40 percent limit. These are mostly types of military equipment.

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The remaining sectors under this cap are saunas, bathhouses and massage parlors, gambling, the production of dangerous drugs, or domestic companies that either have less than US$ 200,000 in capital, possess advanced technology, or employ over 50 individuals.


Interestingly, Cambodia does not impose restrictions specifically on foreign investment. However, only Cambodians or Cambodian-invested companies can own land. Some sectors do require a license, but this would be the same license as required from Cambodian companies.

As such, and given the country’s low wages and available natural resources, Cambodia offers investors a unique frontier market play within the ASEAN bloc. Nevertheless, despite the absence of a Negative list, the country is still best entered only with the assistance of an experienced professional service firm. For more information on opportunities in Cambodia, as well as on Negative lists and their impact on investment region wide, please contact the specialists at Dezan Shira & Associates as


Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

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