Indonesia Offers Incentives, Cuts Red Tape for Green Investment

Jakarta. The Indonesian government is trying to bring in more investment into the green sector with incentives and less red tape, as the coal-reliant country seeks to transition to renewables.
Indonesia is aiming for 23 percent renewables in its energy mix by 2025. The country has also set a goal to achieve net-zero emissions by 2060 or sooner.
Southeast Asia's biggest country has a large renewable energy potential, which the government reported to reach a whopping 3,686 gigawatt. But for Indonesia, shifting to renewables would be no easy feat. In addition to the heavy coal reliance, energy transition requires substantial investment. The government also projected that it would need $1,108 billion in investment to achieve net zero by 2060.
In November 2020, President Joko "Jokowi" Widodo enacted the Omnibus Law on Job Creation which streamlines Indonesia’s complex regulatory environment.
According to the Investment Coordinating Board (BKPM), the Omnibus Law becomes a linchpin to Indonesia’s strategy in enticing investors, including those involved in green industries.
“The Omnibus Law provides ease of licensing, as well as ‘clean and clear’ land. As we know, what mainly prevents investors from investing is land,” Saribua Siahaan, BKPM investment promotion director for Southeast Asia, New Zealand, and the Pacific region told a conference on green investment in Jakarta on Wednesday.
“The Omnibus Law shows that when investing in Indonesia, investors would only need to bring their capital and technology. We will take care of all the permits and we have also streamlined the government administrations," he said.
The government's online submission system -- an electronic-based licensing system -- will also make it easier for investors to get a permit, according to Saribua.
He also added that Indonesia’s green economy had incredible potential.
“The government is thinking of making a system so that investors in this [green] sector truly care about their environmental impact,” Saribua said.
Tax Holiday and Import Duty Exemption
There are currently several incentives available for investors in the renewable energy sector: namely tax holidays, tax allowance, and import duty facilities.
The government may grant investors a corporate income tax cut that can reach up to 100 percent for 5-20 years, depending on how much they invest. The investment amount, however, has to be at least Rp 500 billion (about $33.3 million).
There is also a “mini tax holiday” for those investing Rp 100 billion to Rp 499 billion. Under this scheme, investors can get a corporate income tax cut of up to 50 percent for five years.
For tax allowance, investors can have their corporate net income tax deducted by 30 percent of their total investment – prorated at 5 percent over the course of six years.
They also get to enjoy a two-year import duty exemption when importing their raw materials.
The import duty exemption can go up to four years if the company uses machines with a minimum of 30 percent local content.
Last week, President Joko “Jokowi” Widodo issued a presidential regulation aimed to give an impetus for renewable energy development in the country.
“Hopefully, this new regulation can encourage ministries and government agencies support,” Andriah Feby Misna, the director of various new and renewable energy at the Mineral Resources Ministry, told the same conference.
“Such as by providing fiscal and non-fiscal incentives, ease of licensing for renewable energy development, and ensuring the industrial local content,” she said.
Investment in Renewable Energy
In 2021, Indonesia's investment realization in the energy sector reached $28.2 billion, of which only $1.4 billion came from the renewables sub-sector. Oil and gas accounted for most of last year's energy sector investment realization, amounting to $15.9 billion, data showed.
This year, the government is aiming for $32.6 billion in realized energy sector investment. About $3 billion will come from investments in renewables.
The "Green Investment Potential and Designing an Attractive Incentive" is hosted by business magazine Majalah Investor in partnership with the BKPM.
Tags: Keywords:Related Articles
Indonesia Plans First Nuclear Power Plant by 2034, Eyes Partnerships with Russia and Canada
The proposed facility is designed to have a capacity of up to 500 megawatts and will be developed across Sumatra and Kalimantan.Indonesia Urged to Act on $8 Billion Low-Carbon Fuel Export Opportunity
Eurocham expert urges early investment to capitalize on global demand and incentives.Bali Blackout: Time for The Tourist Haven to Embrace Renewable Power?
The sunny Bali boasts up to 26 gigawatts of solar power potential, according to IESR's estimates.Paper Company Takes Strategic Steps to Promote Renewable Energy
Paper producer APRIL Group has installed solar panels, among others, to boost its renewable energy use.Denmark Tries to Get Closer to Indonesia as Clock Ticks Down to Trump Tariff
Trump has imposed a 32 percent tariffs on Indonesian goods, while imports from Denmark will face a 20 percent levy.Trump Signs Executive Orders to Boost Coal, A Reliable But Polluting Energy Source
He directed agencies to identify coal resources on federal lands, lift barriers to coal mining, and prioritize coal leasing on US lands.BP to Slash Spending on Net Zero Ventures As It Focuses on Oil and Gas Again
Its CEO said the company’s faith in the green energy transition was “misplaced” and that it went “too far, too fast” in recent years.Ditching Coal Needs Money: Energy Minister Bahlil Slams Bad 100-Day Report Card
In response to the bad 100-day scorecard, Bahlil says Indonesia is currently focusing on securing domestic energy supply.Hero Global Investment Sees 27 Pct Surge on IDX Debut
Hero Global Investment (HGII) debuts on the Indonesia Stock Exchange, with shares rising 27% following its IPO.The Latest
Japan Conducts First Missile Test on Its Own Territory
Japan is also developing Type 12 surface-to-ship missiles with a range of about 1,000 kilometers (620 miles), 10 times that of a Type 88.Indonesia Plans First Nuclear Power Plant by 2034, Eyes Partnerships with Russia and Canada
The proposed facility is designed to have a capacity of up to 500 megawatts and will be developed across Sumatra and Kalimantan.Indonesia Urged to Act on $8 Billion Low-Carbon Fuel Export Opportunity
Eurocham expert urges early investment to capitalize on global demand and incentives.The Strait of Hormuz Is a Vital Route for Oil -- Closing It Could Backfire on Iran
If Iran blocked the strait, Asia would be directly impacted because 84 percent of the oil moving through the strait is headed for Asia.Passengers Bound for Qatar Left Stranded at Soekarno-Hatta Airport
The closure came in response to Iran’s retaliatory attack on the US Al Udeid Air Base, located near Qatar’s capital.Most Popular
