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In the fifth part of ALB’s web-only series on what the Year of the Monkey will look like for Asia’s key markets, we speak to lawyers at Makarim & Taira S. on what 2016 holds for Indonesia.

Read the first part of the series on Hong Kong here, the second part on Singapore here, the third part on India here, and the fourth part on the Philippines here.

ALB: What are some of the most important legal and regulatory developments you expect to see in Indonesia in 2016?

Makarim & Taira S.: For the coming year, we believe the Indonesian government will continue to focus on economic development. Accordingly, we expect to see legal and regulatory changes in the areas of anti-corruption, competition, foreign investment, finance restructuring, healthcare, national security and terrorism, and tax. We also expect to see legal developments in infrastructure and mining (most likely in relation to the acquisition of land), employment and the environment. Furthermore, regulations related to electronic information and transactions are likely to be updated, particularly with regard to data protection. 

The changes to the Indonesian competition law are likely to be significant and will affect merger control, the expansion of the extraterritorial application of the law, the size of fines, and the easing of certain restrictions under the Negative List. The new competition law is also expected to introduce a leniency procedure. With regard to foreign investment, the government is expected to make changes to the Negative List of investments, which would open up new areas to potential investors. Finally, the government’s new health insurance scheme (JKN) is expected to lead to a significant growth of the Indonesian healthcare sector. As JKN aims for universal coverage by 2019, the government is looking for significant investments from the private sector.

On the economic front, we expect that the steady depreciation of the Indonesian rupiah will present a challenge for those companies that have to service their loans in a foreign currency. At the current exchange rate we anticipate an increase in debt restructuring and non-performing loans. The overall slowdown of the Indonesian economy has also resulted in a sharp drop in equity prices. This, in turn, might well result in a flurry of M&A activity for the coming year from investors seeking to take advantage of the decreased valuations.

ALB: From an investors’ perspective, what were some of the trends you saw in 2015? Do you expect these to continue in 2016?

Makarim & Taira S.: The presidency of Joko Widodo has brought a number of positive legal and regulatory changes. He has provided serious support for the KPK (Indonesia’s anti-corruption commission), and has also made great efforts to reduce administrative burdens on businesses, leading to a reduction in the cost of the distribution of goods, e.g. through the “tol laut” concept. In addition, his team has introduced new policies and procedures at the BKPM (The Investment Coordinating Board) to make it easier for investors to invest in Indonesia. In the coming year, we expect to see a continuation of these policies through economic diplomacy, in combination with a continued effort by the government to improve the investment climate in Indonesia.

ALB: What were some of the trends when it came to the kinds of work your firm did in 2015?

Makarim & Taira S.: As a consequence of the slowdown of the Indonesian economy over the past year, our firm has been asked to advise a number of clients on various aspects of procedures for restructuring, redundancies and liquidation. In addition, we also saw increased activity with regard to corporate litigation concerning matters, such as breach of contract (often due to a default on a payment obligation) and bankruptcy proceedings.

ALB: How do you see the legal industry in Indonesia evolving in 2016?

Makarim & Taira S.: The developments in the Indonesian legal industry will most likely mirror those of last year. We see a continued emphasis on activity in power/energy, mining and construction projects. We also see opportunities for investment in businesses that will be opened up to foreigners this year, such as e-commerce, cold storage, sugar production and rubber production. In addition, we expect to see more developments concerning enforcement actions and debt restructuring.

On the international front, we anticipate that the creation of the ASEAN Economic Community will provide opportunities for increased regional trade in goods and services.

ALB: What kinds of advice are you giving clients about the coming year?

Makarim & Taira S.: Over the past year, we saw an increase in the number of investors coming in to acquire assets such as land and seeking to take advantage of the soft market and the weak IDR. We expect this trend to continue in 2016. We would advise our clients that while this year holds many opportunities, they need to be cautious and take a long-term view.

The respondents included Alexandra Gerungan (Partner), Ben Clanchy (Foreign Legal Consultant), Jeffrey Senduk (Foreign Legal Consultant), Kurniawan Tanzil (Partner), Lia Alizia (Partner), Lina Amran (Partner), Maria Sagrado (Partner) and Teddy Suprijadi (Partner).

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