Indonesia reviews ownership rules for down-market hotels

The Indonesian government may permit complete privatization and 100-percent foreign ownership for all of its hotels, a move that could be a big boost to tourism.

Under the current regulation, only hotels rated at three stars or higher can be completely owned by a foreign investor. Hotels rated at one or two stars can only have a foreign investment of 51 percent.

The head of BKPM, Indonesia's national investment coordinating board, Franky Sibarani said in a statement that the agency had received requests from "relevant government agencies" and private sectors to “free up the sectors.”

BKPM is working with government ministries and agencies to review the negative investment list that will decide the sectors that can or cannot receive foreign investment. The new ruling on DNI will likely be issued by May.

“The move to open investment in hotels and restaurants for foreign investments is expected to help improve the quality standard of service at hotels and restaurants in Indonesia, which ultimately support the development of tourism sector,” Sibarani said. “There have been a lot of requests from foreign investors to inject capital in first and second star hotels however they have been hesitating to do so due to shared ownership limitation. In addition, the development of hotels and restaurants can support the government’s efforts to boost tourist visits to Indonesia.” 

The government hoping to increase the number of foreign toursits visiting Indonesia to 12 million in 2016.

From Oct. 22 to Dec. 11, BKPM identified eight major foreign investment hospitality projects, including two from China worth around $590 million in Lombok Island and Batam, Riau Islands; two from Uni Arab Emirates in Jakarta and Bali; two major hotel projects from South Korea to be located in Bandung and Semarang; one from Australia; and one from Russia.