Indonesia Considers Opening Investment Opportunities for Foreign Hospitals

Indonesia is said to be considering changes to the so-called Negative List that would ease the way for the establishment of foreign hospitals here. What are these changes and what would they mean to investors?  

The chairman of the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal or "BKPM"), Thomas Lembong, said on February 13, 2019, that the government was considering changes to the foreign capital investment rules for foreign hospitals. According to Lembong, the changes being considered would open the way for the establishment of foreign hospitals.

Foreign capital investment in Indonesia is governed by the so-called Negative List, or in Indonesian the Daftar Negatif Investasi ("DNI"), which stipulates any restrictions on foreign investment in different business sectors. Business sectors are defined in the Indonesia Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia or "KBLI").

The current rules governing maximum foreign capital investment are found in Presidential Regulation No. 44 of 2016 regarding Lists of Business Fields that Are Closed and Business Fields that Are Open with Conditions to Investment ("2016 DNI"), and the 2017 KBLI as stipulated in Chairman of Central Statistics Agency Regulation No. 19 of 2017 regarding the Amendment of Chairman of Central Statistics Agency Regulation No. 95 of 2015 regarding the Indonesia Standard Industrial Classification ("2017 KBLI").

Under the 2017 KBLI, Private Hospital Activities fall under KBLI No. 86103, which is open to a maximum of 67% foreign capital investment (70% for investors from ASEAN countries). Foreign-owned private hospitals cannot operate in capital cities in eastern Indonesia, with the exceptions of Makassar and Manado.

The government has not hinted how the foreign investment rules for hospitals may change, but it seems likely that the government will relax the DNI rules applicable to foreign hospitals to allow 100% control by foreign investors.

The government recently issued Minister of Health Regulation No. 30 of 2019 regarding the Classification and Licensing of Hospitals ("MOH Reg. 30"), which allows foreign investors to invest in general type A or B hospitals and special type A or B hospitals. The above types of hospital do not include maternity hospitals, which under the 2016 DNI are entirely closed to foreign investment.

MOH Reg. 30 further provides that hospitals that are owned by a foreign investment limited liability company, or PT PMA, must have at least 200 beds and be established based on an international cooperation. Subject to Indonesian laws and regulations on foreign manpower, a foreign-invested hospital may employ foreign nationals as medical and non-medical workers according to the hospital\'s service needs.

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