Introduction of new categories. The key categories of the new NIL are:

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1 NEWS FLASH NEW NEGATIVE LIST F INVESTMENT LEAPING INT A BETTER ECNMY n May 12, 2016, President Joko Widodo (Jokowi) signed Presidential Regulation No. 44/2016 ( PR-44 ) on Negative Investment List ( NIL ). PR-44 provides a list of business sectors that are prohibited or restricted and those that are open with conditions for investment. PR-44 is in force from 18 May 2016 and cancels the previous Presidential Regulation No. 39/2014 ( PR-39 ). The new NIL is one of the Indonesian Government s commitments to boost both and domestic investment activities within the country and improve Indonesia s regional competitiveness. Indonesia is recognized as the largest economy in the ASEAN region such that it presents great investment opportunities for businesses. PR-44 is intended to encourage greater direct investment while at the same time retain some reservation on certain business sectors. Introduction of new categories The key categories of the new NIL are: a. Business lines that are now open for 100% (subject to specified licensing/technical requirements in certain instances); b. Business lines where 100% is not permitted, but where the level of permitted investment has been increased; c. Business lines that are reserved for investment by, or in partnership with, Domestic Small and Medium Enterprises (); and d. Business lines that are entirely closed to both and domestic investment. Key takeaway The NIL has generally widened the overall scope of business for which is permitted. It remains to be seen whether this will help improve Indonesia s economy in future years. Parties who are looking to make an investment into Indonesia may also want to explore business sectors that have facilities available. If you re interested to explore this further, please contact the listed below individuals. For more information on how BD can help you in planning and navigate this major changes, please contact our technical team at Irwan Kusumanto, ikusumanto@bdo.co.id; or Michelle Mianova, mmianova@bdo.co.id BD Indonesia Prudential Tower 16th-18th Floor Jl. Jenderal Sudirman, Kav. 79 Jakarta 12910, INDNESIA Tel : Fax :

2 The table below provides a comparison between PR-39 and PR-44 and a note whether or not tax facilities are available for a particular line of business. We will discuss Goverment Regulation No 9/2016 in our next publication. 1. Telecommunication and Information Certain e-commerce activities (in the form of market place, daily deals, price grabber, and/ or online classified ads model) involving investments of more than IDR 100 billion Not regulated to Telecommunication equipment certification 95% to Certain e-commerce activities (in the form of market place, daily deals, price grabber, and/or online classified ads model) with investment of less than IDR 100 billion Not regulated 49% Fixed and mobile telecommunication networks 65% Telecommunication networks integrated with telecommunication services 65% Telecommunication services (e.g. internet service providers) 49% 2. Energy and mineral resources Biomass pellet industry for (renewable) energy Examination and testing of high voltage electrical installation Partnership with domestic required to 100% domestic 49% 3. Health Business and management consultancy/ hospital consultancy services 67% to

3 tax concession Health support services: a. Medical equipment rental b. Laboratory, medical check-up clinic a. 49% b. 67% to to Manufacture of raw materials for medical pharmaceuticals 85% to 4. Industry Crumb rubber 100% domestic Cane sugar (white, refined and raw) 95% (and subject to certain sugarcane plantation requirements) 5. The Public works Toll road management 95% to. Subject to: - Specific license from the Ministry of industry and - requirements as regards sourcing its own raw materials, these may include minimum sourcing requirements from Domestic Reserved for partnership with Domestic (on the basis of an inti-plasma scheme) to

4 Construction consultancy services involving: a. advanced technology b. high risk and/or c. a value of more than IDR 10 billion 55% (regardless of the nature or value of the work) Construction consultancy services that: a. use simple/medium technology b. are low/medium risk and or c. have a work value of less than IDR 10 billion 55% (regardless of its nature and /or work value) Reserved for Domestic Construction implementation services that: a. use simple/medium technology b. are low/medium risk and or c. have a work value of up to IDR 50 billion Note that for construction implementation services that: a. use advanced technology b. are high/risk and or c. have a work value of more than IDR 50 billion, the limit is maintained at up to 67% (or up to 70% for ASEAN Reserved for Domestic if: a. use simple technology b. are low risk and or c. have a work value of up to IDR 1 billion 67% if: a. use advanced technology b. are high/risk and or c. have a work value of more than IDR 1 billion, Reserved for Domestic 6. Trade Cold storage a. 33% for Sumatera, Java and Bali b. 67% for Kalimantan, Sulawesi, Nusa Tenggara, Maluku, and Papua Distribution affiliated with production 33% to to Futures Brokers 95% to Direct selling through marketing networks 95% to

5 Department stores (with retail space of 400 m2 to 2,000 m2) 100% domestic (in respect of department stores of less than 2,000 m2) Distribution (non-affiliated with production) 33% Warehousing 33% Retail, trading via mail or internet order (for goods under the categories of food, beverages, tobacco, pharmacy, cosmetics, laboratory devices, textiles, apparel and footwear, household and kitchen goods) 100% domestic Subject to partnership with Domestic 7. Tourism and Creative Economy Bars, cafes and operation of sports facilities (e.g. bowling arenas, gyms) 49% (or up to Domestic ) to Film studios, film processing laboratories, film dubbing facilities, film printing and/or duplication facilities 49% to Film shooting facilities, film editing facilities, film subtitling facilities, film production, cinema, recording studios, film distribution 100% domestic to Restaurants 51% to Golf courses 49% (or up to Domestic )

6 Travel bureaus 49% (or up to Domestic ) Motels 49% (or up to Domestic, or up to 70% Private museums 51% Meeting, incentives, conferences, and exhibitions (MICE) operations 51% 8. Manpower Professional training (e.g. computer courses, TEFL/IELTS courses, speed reading courses, modelling courses) 49% 9. Transportation Passenger land transportation (inter-city and inter-province transport, rural transport, urban transport, in province intercity transport, cross-border transport) Non-scheduled land transportation (taxis, tourism transport, certain area/ destination transport) 100% domestic 49% 100% domestic 49% Supporting services for transport terminals 49% Air transportation supporting services (Computer reservation system, ground, handling and aircraft leasing) 49%

7 Services activities related to airports 49% Freight forwarding services 49% Air cargo expedition services 49% General sales agencies for airlines 49% Maritime cargo handling services 49% (or up to 60% (or up to 70% investors in specific ports) Note: tax facilities are available tax facilities are not available As noted from the table above, the 2016 NIL offers higher limits to investors of ASEAN member countries in certain business lines. It remains a question on how the government would ensure if an investment genuinely qualifies for a higher and not providing rooms for a non- ASEAN investor to use a wholly owned ASEAN entity to access the privilege of higher. The authorities through the Investment Coordination Board (BKPM) may require to see a full corporate/group structure before an approval is granted. Grandfathering principle for existing investments A special grandfathering provision is contained within the 2016 NIL so that any existing investors in industry sectors that have been affected by the new NIL are permitted to retain their previously approved investment even if that investment now exceeds the new permitted threshold or is prohibited. This is intended to provide legal certainty to existing investors. In summary, the following shall apply: - Should the allowable share is reduced under the 2016 NIL, the new requirement is not applicable to existing investors. - Should a higher is allowed under the 2016NIL, existing investors may increase up to the permissible limit. - The above are also applicable for future business expansions within the same business line. Existing investments are also grandfathered in the event of a merger or an acquisition (but not in consolidation of companies) where the relevant companies are in the same business line. Mergers, Acquisitions and Consolidations Article 9 of the 2016 NIL lays out special requirements for mergers, acquisitions and consolidations: in case of a merger, NIL will apply to the surviving company for its principle business line; in case of an acquisition, NIL will apply to the acquired company s principle business line; and in case of a consolidation, the 2016 NIL will apply to the new company.