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Against the backdrop of a rapidly evolving financial technology ("FinTech") landscape, Bank Indonesia ("BI") recently issued Regulation No. 19/12/PBI 2017 on the Organization of Financial Technologies ("Reg 19/12 2017"), and its implementing regulation, Regulation No. 19/15/PADG/2017 ("PADG 19/15 2017"), which sets out the procedures for registration, submission of information, and monitoring of financial technology organisers.
The regulation's primary development is the introduction of a regulatory sandbox – being a controlled program to test innovative FinTech services under BI supervision, which will then determine whether those services can be rolled out commercially. By providing FinTech innovators some scope to test their products in a live environment, the new rules recognise that start-ups developing sophisticated technological products and services face challenges in determining whether their businesses meet regulatory requirements.
The sandbox scheme is relevant to companies, businesses and investors with interests in the management and organisation of financial technologies, which include companies involved in the development of: payment systems – such as blockchains or distributed ledgers; market support – ie: aggregators; investment management and risk management services – such as online investment products and online insurance; loans, financing and capital allocation – such as peer-to-peer lending and crowd funding; and/or other financial services.
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The Indonesian Government continues to deliberate a Bill on Palm Oil ("Palm Oil Bill"). The Palm Oil Bill faces criticism from a cross-section of stakeholders including the Office of Indonesian Sustainable Palm Oil ("ISPO"), the Indonesian Palm Oil Smallholders Association ("Apkasindo"), and environmental activist groups.
The proposed law will cover licensing, land cultivation, foreign ownership, processing standardisation, trade, and incentives for investors in the palm oil industry. The Palm Oil Bill requires foreign investors to cooperate with domestic partners by establishing an Indonesian limited liability company, and states that further details on foreign shareholding ownership limits will be addressed under a specific government regulation. At present, Indonesia's investment regulations set a 95% cap on foreign ownership of Palm Oil businesses. Whether a new foreign shareholding ownership limit will be set remains uncertain.
The incentive scheme that will be made available to qualified investors includes, among others: income tax reduction, import duty exemptions or relief, VAT exemptions for certain periods of time, accelerated amortisation, land and building taxation relief, and /or product marketing support.
ISPO representatives criticise the Palm Oil Bill for its failure to implement actionable solutions to land acquisition issues. At the same time, Apkasindo secretary-general Asmar Arsjad argues that some articles under the Palm Oil Bill are obscure, and tax incentives favour large plantations over smallholders.
The Palm Oil Bill features as a priority of the 2017 National Legislation Program list. If the Bill is passed, the Government must issue its implementing regulations no later than one year after the law is passed.
On 2 October 2017, Indonesia submitted its instrument of accession to the Madrid Protocol, making Indonesia the 100th member-state under the treaty. Under the Madrid System, an owner of an existing International Trademark Registration ("IR") will be able to expand the scope of the protection of its marks in any Madrid System member-territory, by filing a single international application and paying a single set of fees.
The Madrid Protocol came into force in Indonesia on 2 January 2018.
Bank Indonesia ("BI") has issued Governor Board Regulation on Local Currency Settlement ("LCS") to settle trade transactions between Indonesia and Thailand using Baht, as well as between Indonesia and Malaysia using Ringgit. This is aimed at reducing dependence on certain currencies and maintaining exchange rate stability.
Bilateral trade without using US dollar will be conducted through commercial banks designated as intermediaries, called Bank Appointed Cross Currency Dealer ("ACCD Banks"). BI and the counterpart authorities in Thailand and Malaysia will assign AACD Banks, which will have flexibility in performing certain financial transactions and activities in foreign exchange markets. These financial transactions and activities include the opening of Baht and Ringgit currency accounts, direct quotes for Baht and Ringgit currencies to Rupiah, and trade financing in Baht and Ringgit currencies.
The Regulation on LCS came into force on 2 January 2018.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only
intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.
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