REFORMS IN INDONESIAHOW TO TAKE INVESTMENT SERVICE TO THE NEXT LEVEL

REFORMS IN INDONESIAINDONESIA, THE LARGEST ECONOMY IN SOUTHEAST ASIA, IS NOW BECOMING ONE OF THE MOST ATTRACTIVE INVESTMENT DESTINATION IN THE WORLDIN THE LAST 5 YEARS, THE TOTAL OF INVESTMENT REALIZATION IN THE G-20 MEMBER STATE INCREASED BY 22.4% IN AVERAGE, REACHED US$43BILLION LAST YEAR

REFORMS IN INDONESIAHOWEVER, THE GOVERNMENT IS AWARE THAT DOING BUSINESS IN THE WORLD´S LARGEST ARCHIPIELAGIC NATION IS NOT THE EASIEST.

AMONG THE MAIN CONCERNS OF INVESTORS IN INDONESIA ARE:

QUALITY INFRASTRUCTURE AND LOGISTICS COSTS INEFFICIENT BUSINESS LICENSING, CORRUPTION REGULATION POLICY ISSUES LABOR ISSUES

REFORMS IN INDONESIATHE GOVERNMENT RECOGNIZED THESE ISSUES, AND NOW IS WORKING THROUGH AN AGENCY, THE INDONESIA INVESTMENT BOARD (BKPM), TO IMPLEMENT THREE REFORM PRIORITIES:

1. THE IMPROVEMENT OF BUSINESS LICENSING

2. THE DEBOTTLENECKING OF INVESTMENT REALIZATION

3. THE DEVELOPMENT OF INVESTMENT CLIMATE BY IMPROVING BOTH FISCAL AND NON-FISCAL FACILITIES

REFORMS IN INDONESIA

REFORMS IN INDONESIA1.THE IMPROVEMENT OF BUSINESS

LICENSING BY INAUGURATING THE NATIONAL ONE-STOP INTEGRATED SERVICE

(OSS) CENTER, FOR INVESTMENT AT THE BKPM EARLIER THIS YEAR

INVESTORS CAN NOW PROCESS INVESTMENT LICENSES AT BKPM WITHOUT HAVING TO LIAISE WITH OTHER MINISTRIES/ INSTITUTIONS

THIS ALLOWS AUTHORITIES TO REDUCE PROCESS TIME, SYNCHRONIZE PROCEDURES, AVOID AUTHORITY OVERLAP, AND ELIMINATE RED TAPE.

REFORMS IN INDONESIACOST OF DOING BUSINESS

COST OF DOING BUSINESS IN INDONESIA SOURCES FROM DOING BUSINESS REPORT 2014, A STUDY ELABORATED BY THE WORLD BANK GROUP TO MEASURE THE COSTS TO FIRMS OF BUSINESS REGULATIONS AND THEIR ENFORCEMENT ACROSS 185 ECONOMIES AND SELECTED CITIES AT THE SUBNATIONAL AND REGIONAL LEVEL. TO HAVE PERSPECTIVES ON BUSINESS RELATED REGULATIONS AND COST UPON DOING BUSINESS IN INDONESIA, PLEASE VISIT EASE OF DOING BUSINESS IN INDONESIA 2014 

Office Lease Cost Manpower Cost Fuel Cost Water Tariff Electricity Cost

 

REFORMS IN INDONESIA2. THE DEBOTTLENECKING OF INVESTMENT

REALIZATION

RECENTLY, BKPM HAD SOLVED A NUMBER OF PROBLEMS HAMPERING INVESTMENT OF 22 COMPANIES WORTH US$ 99 BILLION, OUT OF 88 COMPANIES UNDER FACILITATION SINCE LAST YEAR

THE ISSUES ARE MAINLY RELATED TO: Land acquisitions Misuse of permits Supply of raw materials Cooperation contracts Tax regulation

REFORMS IN INDONESIA

2. THE DEBOTTLENECKING OF INVESTMENT REALIZATION

IN ADDITION, THE BOARD IS ALSO STRENGHTENING ITS END-TO-END SERVICE FOR INVESTORS, FROM IDENTIFYING AND EXPLORING INVESTMENT INTERESTS, FACILITATING INVESTORS TO OBTAIN PRINCIPAL LICENSE, TO REALIZING THEIR INVESTMENT PLANS

REFORMS IN INDONESIA3. THE DEVELOPMENT OF INVESTMENT CLIMATE BY IMPROVING BOTH FISCAL AND NON-FISCAL FACILITIES

INDONESIA OFFERS FISCAL FACILITIES FOR INVESTORS, AMONG OTHER THINGS, IN FORMS OF :

IMPORT DUTY FACILITY TAX ALLOWANCE TAX HOLIDAY

THE GOVERNMENT AIMS TO REDUCE THE INVESTMENT LICENSE PROCESSING TIME TO MÁXIMUM 15 DAYS FOR

EACH TYPE OF PERMIT REDUCE STARTING-A-BUSINESS PRODEDURE FROM SEVEN TO ONLY FIVE STEPS

REFORMS IN INDONESIAImport Duty Facility Regulation of The MoF No. 176/PMK.011/2012 (amandement  Regulation of The MoF No. 176/PMK.011/2009)

Facility

o Exemption from import duty on the import of machines, goods and materials for production for a period of 2 years.

o Import duty facility for a period of 4 years is granted to a company using locally-produced machines at least 30% of the total value of machines for its production.

Criteria

o Import duty facility is granted to a company industrial sector which produces:

o Goods and/or

o Services, including :

o Tourism and culture

o Public transportation

o Public health services

o Mining

o ConstructionTelecommunication

o Port

o Import duty facility may be granted to the extent that the machines, goods and materials:

o are not produced in Indonesia;

o are produced in Indonesia but the they do not meet the required specifications;

o are produced in Indonesia but the quantity is not sufficient for the need of the industry

INVESTMENT INCENTIVES

REFORMS IN INDONESIA TAX ALLOWANCE GOVERNMENT REGULATION NO.144 YEAR 2012 (AMANDEMENT GOVERNMENT REGULATION NO.52 YEAR 2011)

Reduction of net income of 30% (thirty percent) of the investment, charged for 6 (six) years respectively at 5% (five percent) each year.

Eligible for 129 business segments since 2011, expanded from 38 segments in the previous regulation.

Under centain requirements, among others: minimum amount of investment value and workforce, and certain project location (especially outside Java island).

Accelerated depreciation and amortization, Imposition of income tax on dividends which paid to foreign tax subject of

10% (ten percent), or a lower rate according to the avoidance of double taxation agreement, and

Compensation losses longer than 5 (five) years but not more than 10 (ten) years with the certain conditions (can be seen in the regulation)

INVESTMENT INCENTIVES

REFORMS IN INDONESIA

TAX ALLOWANCE GOVERNMENT REGULATION NO.144 YEAR 2012 (AMANDEMENT GOVERNMENT REGULATION NO.52 YEAR 2011

INVESTMENT INCENTIVES

REFORMS IN INDONESIA

TAX HOLIDAY REGULATION OF THE MOF NO. 130/PMK.011/2011Facility

o A taxpayer can be granted a tax relief facility for a period of between 5 and 10 years, starting from the commencement of its commercial production.

o After the expiration of the tax holiday, the taxpayer will be entitled to an income tax reduction of 50% for a further2 years.

o By considering the purpose of maintaining the competitiveness of national industries and the strategic value of certain business activities, the duration of the tax relief and reduction can be extended based on a decision by the Minister of Finance .

Criteria

o Constituting a pioneer industry:

o Basic metal industries;

o Oil refinery industries and/or basic organic chemicals originating from oil and natural gas;

o Machinery industries;

o Industries in the field of renewable resources;

o Communication devices industries.

o Having a new investment plan having obtained the approval of competent authorities in a minimum amount of IDR 1 trillion (USD 100 million).

INVESTMENT INCENTIVES

REFORMS IN INDONESIATHE AGENCY ENCOURAGE INVESTMENT IN KEY SECTORS, ACCORDINGLY WITH THE GOVERNMENT´S WORK PROGRAM, NAMELY: INFRASTRUCTURE; MANUFACTURING; MARITIME ; TOURISM, SPECIAL ECONOMY ZONE (SEZ), AND INDUSTRIAL PARKS

REFORMS IN INDONESIA

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