President Joko Widodo Innaugurated JIIPE - Photo by President Office

JAKARTA (TheInsiderStories) – President Joko Widodo is confident that the Java Integrated Industrial Ports and Estate (JIIPE) will attract investments valued up to Rp83.2 trillion (US$6.07 billion). This integrated port area is expected to accommodate 183 industries from various sectors.

President Widodo made the statement when officially inaugurated the industrial zone, which is located in Gresik, East Java on March 9. According to Industry Minister Airlangga Hartato, there are currently eight companies that have already invested in the JIIPE and two of them have already been in operation.

The companies that have established their presence in the area are including PT Clariant Indonesia, PT UnichemCandi Indonesia, PT Nippon Indosari Corporindo Tbk (IDX: ROTI), PT Hextar Fertilizer, and PT Adhimix Precast Indonesia.

 

The JIIPE area consists of a 2,933-hectare industrial zone, a 400.10-hectares port, 765.77-hectares residential estate and a 1,761.40-hectares industrial complex. The industrial zone is powered by 13 megawatts of electricity supply supported by state-owned gas distributor PT Perusahaan Gas Negara Tbk (IDX: PGAS).

The industrial complex can accommodate companies from the automotive industry, heavy and palm oil based industries, and SMEs, which are expected to provide 500,000 jobs.

The development of JIIPE’s area in the proposed location has complied with the regional government regulation Number 8 Year 2011 about Spatial Plan of Gresik Regency of 2010 – 2030.

The Government of Indonesia expects 10 more industrial zones to offer a direct construction incentive’ to investors who agree to build their facilities in these specified zones.

Industrial Zones

Since 2015, the government has called on all industry players to concentrate their operations in industrial zones, with incentives provided to make it attractive for them to construct their facilities in such zones.

The government is hoping to see more investors become involved in developing industrial zones outside Java, which has historically dominated economic activity in the nation.

The development of such special economic zones outside Java is part of the ‘equitable development’ and at the same time a segment of the Master Plan of Acceleration and Expansion of Economic Development of Indonesia.

The Government has targeted Rp250.7 trillion in investment, for a total of 13 Industrial Zones namely Sei Manke, Banten, Morowali, JIIPE Gresik, Kendal, Wilmar Serang, Dumai, Konawe, Palu, Bitung, Ketapang, Lhokseumawe (Aceh) and Tanjung Buton will all welcome projects.

In 2015, the government unveiled its sixth economic package, aimed at revitalizing an under-performing economy. The stimulus package aims to attract foreign direct investment to the special economic zones sited around the country.

Under the new economic stimulus package, investors can qualify for generous income tax discounts ranging from 20 to 100 per cent for up to 25 years. In order to qualify for a 15-year tax holiday, investors would need to guarantee an investment of Rp 500 billion, while an investment of at least Rp1 trillion would be required to qualify for a 25-year tax holiday.

The regulation divides industrial zones into four categories, namely, developed industrial development estates (WPI)  in Java, southern Sulawesi, eastern Kalimantan, northern Sumatra (except for Batam, Bintan and Karimun) and southern Sumatra, northern Sulawesi, western Kalimantan, Bali and Nusa Tenggara, also in Papua and West Papua.

What’s more, the government also granted a Value Added Tax (VAT) exemption facility on imports and/or delivery of machinery and factory equipment to be used by Companies in Industrial Area and Industrial Zone Companies.

The exemption from import duty on such machines and goods may be provided on imports originating from the Free Port and Free Trade Zone, Special Economic Zones, or Bonded Warehouses.

With the incentives, the government is optimistic another 10 industrial zones will be done by 2019. Three will be operated this year, namely Lhokseumawe industrial area in Aceh, the industrial area of Wilmar Group in Serang, and Tanjung Buton industrial area in Riau.

US$1: Rp13,700

Elisa Valenta contributed on this story, my email: linda.silaen@theinsiderstories.com

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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