Sixth Stimulus Package Offers Incentives for Planned SEZs
Jakarta. The Indonesian government issued its sixth stimulus package since September, this time offering hefty tax discounts to companies operating in special economic zones.
The set of policy measures is designed to boost foreign investment in Indonesia and reinvigorate an economy growing at its slowest pace in six years.
Announcing the package in Jakarta on Thursday, Cabinet Secretary Pramono Anung said the government would offer tax discounts of 20 to 100 percent for a 10- to 15-year period for companies operating in SEZs with total investment of Rp 500 billion to Rp 1 trillion ($36.7 million to $73.4 million).
Identical incentives are available for companies that use locally sourced natural resources and materials.
Indonesia has designated eight areas as SEZs: Sei Mangkei in North Sumatra province; Tanjung Api-Api in South Sumatra; Maloy Batuta in East Kalimantan; Palu in Central Sulawesi; Bitung in North Sulawesi; Morotai in North Maluku; Mandalika in West Nusa Tenggara; and Tanjung Lesung in Banten.
The measures unveiled on Thursday mirror those adopted earlier by Vietnam, which allows foreigners to manage enclosed zones that typically enjoy freer trade rules, lower tax rates, and better infrastructure in order to boost manufacturing and exports.
Franky Sibarani, the chairman of the Investment Coordinating Board, or BKPM, previously said that Singaporean and Chinese investors had expressed interest in investing in and managing such zones.
Darmin Nasution, the chief economics minister, said President Joko Widodo would formalize the new incentives in a soon-to-be-issued government regulation.
“Hopefully this is the beginning of our bid to simplify the investment process into several regions,” he said.
Prior to Thursday’s announcement, the Joko administration had rolled out five economic stimulus policy packages between since Sept. 9, which include measures to, among others, simplify the process for obtaining export and import licenses as well as investment permits; reduce the price of fuel and electricity for industry; introduce a formula-based minimum wage system; and ease export financing for small and medium enterprises.
The most recent stimulus package, announced two weeks ago, aims to scrap double taxation for companies, revalue assets of state-owned enterprises, and providing incentives for shariah banks.
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