Indonesia to Offer More Incentives for Green Investments


APRIL 28, 2015

Jakarta. The Indonesian government plans by the end of this year to offer more incentives to local and foreign investors who use technology that reduces pollution and conserves energy.

The Environment and Forestry Ministry is finalizing policies that will provide the companies with soft-loan facilities, longer business permits and free import duties, said Siti Nurbaya, the environment and forestry minister, at the press conference of the Tropical Landscape Summit 2015 in Jakarta.

The policies will add to existing fiscal incentives such as tax allowances, or discounts on corporate income tax for a certain period, and tax holiday, which exempts income tax for up to a decade, she said.

Siti said her ministry will provide soft loans that bear interest of “around 5 percentage points below the average loan rate,” but that is subject to approval from the Finance Ministry and the Financial Services Authority (OJK).

The minister also plans to secure business permit for up to 35 years with automatic renewal, in order to provide more business certainty to companies that implement practices in preserving the environment.

In addition the ministry also proposes a scheme that exempts taxes on imports of equipment that can reduce pollution.

The government has identified nine business areas that can contribute to environmental preservation and are currently eligible for tax allowance. These are the exploitation of geothermal power, refining and natural gas processing industry, organic basic chemical industry, agricultural industry, gas tube lights industry, power generation, clean water reservoir and purification industry, eco-friendly urban transportation industry, eco-tourism and waste management industry.

“Tax allowance can be an attractive way to lure local and foreign investment, particularly for green investments,” said Franky Sibarani, the chairman of Investment Coordinating Board (BKPM).

Some aspects of preserving environment have included various investments in agriculture, fishery, geothermal, biofuel and forestry in the past five years, Franky said.

Still, more sophisticated and high-technology industries such as solar-powered electricity production have yet to be included.

Investment realization in the sectors for the past five years (2010-14) have reached around Rp 486 trillion ($37 billion), or 30 percent of the total investment plan of Rp 1,600 trillion recorded by BKPM in the same period.

Franky said BKPM targeted green investment from foreigners to reach $56 billion by 2019 and local green investment to reach Rp 448 trillion.