Indonesia will now allow foreign buyers to purchase property in the country and own bigger shares in health-care firms, as it completes a review of investment rules, according to the country’s investment coordination agency.
Gita Wirjawan, chairman of the Investment Coordination Board of Indonesia, said in a forum that Southeast Asia’s biggest economy intends to deregulate its property industry by the end of H1 2010, allowing foreigners to buy homes and commercial properties directly. The move will “unleash value,” he added.
“The government is committed to continuously comb through policies to make it easier to invest in Indonesia,” Wirjawan said in an interview after the forum. “I am optimistic that once we can be seen to be taking steps in the right direction, we’ll be able to reach a 15 percent increase in foreign investment over last year’s $14 billion.”
President Susilo Bambang Yudhoyono has pledged to double spending on airports, roads, and seaports to $140 billion over the next five years, as he aims to deliver an average of 6.6 percent economic growth over the rest of his term ending 2014.
Ms. Natalia Sutanto, property analyst at PT Bahana Securities, said: “Property companies that sell apartments will benefit the most, especially those who are currently building.” Ms. Sutanto covers over six Indonesian property firms including PT Bakrieland Development, PT Ciputra Development, and PT Lippo Karawaci, which all own high-end condos. She recommends “buy” for the three companies.
“The prices for secondary apartments have reached maturity and they won’t rise too much, especially because the foreigners will likely enter the middle to upper level apartments due to their budget,” she said.
Ms. Sutanto said that the Indonesian government is still working on the details of the regulation and there have been negotiations that the new rights for foreigners may be limited to purchasing only high-rise houses with a value above 1.5 billion rupiah ($165,000).
The regulation may also stop short of allowing total ownership of the property and only provide foreign buyers a right to its use for a certain period of time, she added.
According to Wirjawan, Indonesia has finished reviewing the “negative investment list,” a 2007 presidential decree, which limits foreign ownership in companies. The new rules, which may be released by next week, will include changes in the cap on foreign shares in industries like education, health care, agriculture and logistics, he said.
“There is a spirit of liberalization with respect to health care and hospitals, which was closed off to foreign investment in the past,” he added. Since “there is a recognition Indonesia needs better health care facilities,” foreign investment in health care will be capped at 67 percent, compared to the 49 percent for other industries.
During the forum on Indonesia’s investment climate, Wirjawan said that President Yudhoyono already holds the draft of the revised investment rules.
“This has been a long overdue process, and we’ve finally gotten to a point where all the relevant ministers agreed,” he said. “We’ve all signed off and sent it over to the President and it’s waiting on his desk to be signed.”