Finance Minister Sri Mulyani Indrawati said the ministry is planning to provide incentives to regions that can attract more investment. (Antara Photo/Nova Wahyudi)

Sri Mulyani's Incentives for Regional Administrations to Encourage Investment


JUNE 18, 2019

Jakarta. Finance Minister Sri Mulyani Indrawati has suggested providing incentives to regions that have proven successful in encouraging investment and contributing to economic growth.

"We are thinking of providing incentives to regions that have really improved their investment climate," Sri Mulyani said on Monday after attending a meeting with Commission XI of the House of Representatives (DPR), which oversees banking and financial affairs.

She said the incentives, which would come from the state budget, would boost regional investment and exports by allowing regional governments to compete among themselves.

However, several development indicators would need to be improved in order to attract investment, one of them being good regional governance.

Last year, the government launched an electronic integrated licensing system called Online Single Submission (OSS) to ease business licensing.

President Joko "Jokowi" Widodo has repeatedly told ministries and regional administrations to scrap unnecessary regulations to encourage foreign investment.

In 2017, however, the Constitutional Court revoked the Home Affairs Ministry's authority to abolish regional regulations, deeming it unconstitutional.

The central government would now have to file a judicial review at the Supreme Court if it wants to regain that power.

Sri Mulyani mentioned how Vietnam has been successful in attracting investment amid a trade war between the world's two largest economies, the United States and China.

"We are often asked about Vietnam's fiscal regime, which is now considered successful in attracting investment. Vietnam's corporate tax rate is 20 percent. This is considered low in Southeast Asia," she said.

At 25 percent, Indonesia has the second highest corporate tax rate in Southeast Asia, only behind the Philippines. For companies that are listed on the Indonesia Stock Exchange, the rate is 20 percent. 

The government has proposed an economic growth target of between 5.2 and 5.5 percent and an inflation range of 2 to 4 percent in 2020. The House will need to approve the targets along with the state budget for next year.