INVESTMENT IN HOSPITAL BUSINESS AFTER THE OMNIBUS LAW

One of the most important components on healthcare system is the sufficiency of healthcare facilities, including hospital. With the insufficient numbers of bed available in Indonesian hospital as well as the quality provided in Indonesian hospitals, there is a growing demand for development of healthcare facilities, including hospital, hence there is untapped opportunity on investment in hospital business.

Despite of many controversies on the issuance of Law Number 10 of 2020 on Job Creation or widely known as the Omnibus Law, such Government’s action has brought enthusiasm and attraction to invest in Indonesia. With coverage in various sectors, the Omnibus Law also includes amendment one of the most essential sectors – healthcare and life science. However, this client alert focuses to provide some critical takeaways on investment in hospital business after to the issuance of the Omnibus Law and its implementing regulations (including Presidential Regulation No 11 of 2021 on Investment Business or “PR 11/2021”, Government Regulation No 47 of 2021 on Implementation of Hospital Sector or “GR 47/2021”, and other related regulations).

Concerning the foreign investment in hospital business, PR 11/2021 as implementing regulation of the Omnibus Law gives a new investment approach from the Negative Investment List to Investment Priority List. Through the issuance of such regulation, the Government has uplifted maximum foreign ownership provision of 67% (sixty-seven percent) for non-ASEAN investors and 70% (seventy percent) for ASEN investors. In result, the hospital business is now can be fully owned by the foreign investor. However, despite of such liberalization, the foreign investor shall aware that GR 47/2021 requires a minimum capacity of 200 beds for any hospital with foreign ownership.

In addition to the investment liberalization, there is also a significant simplification on licensing for hospital business. The previous regulation on hospitals obliged every hospital to obtain layered licenses: location, construction and various operational licenses. Under the Omnibus Law, the hospital is only obliged to obtain a business license issued by the Central Government or Regional Governments according to the type of the hospital and assessment on risks of the hospital business. However, the implementing regulations on the procedure of business license issuance by the Central Government as well as the Regional Government and implementation on the risk-based assessment licensing for the hospital business are yet to be issued. Licensing simplification aims to realize the ease of doing business in the hospital sector and attract more investments in the hospital and healthcare industry, considering that licensing was one of the issues that have been impeding investments.

As the Government of Indonesia is also boosting expansions in Special Economic Zones or “SEZ”, the Omnibus Law has included healthcare under the SEZ sectors. Hence, hospital established in SEZ will obtain benefits and facilities offered by each SEZ. As foreign investors' foreign ownership on hospital business is no longer applicable, one of the most lucrative benefits is simplification on licensing process, land acquisition, and tax exemptions for hospital established in SEZ. Additionally, establishing hospital within the SEZ can also be considered by the investors as now there is no longer a land size minimum requirement for SEZ under the Omnibus Law. As the Omnibus Law was issued to promote and realize the ease of doing business in Indonesia, it is expected to see significant business improvements and expansions around regions in Indonesia in the healthcare sector, particularly in the hospital business.

Contributors :

Jessica Calista

Endraswari E. Sayekti