JAKARTA (TheInsiderStories) – Indonesian government has set a positive investment list as stipulated in the Government Regulation Number 10 of 2021 concerning the Investment Business Sector. This regulation will take effect on March 4 and aimed to boost the capital inflow from domestic and foreign investors.
The government offers an incentives such as tax allowances to the “priority list” in select industries such as geothermal, smelting of ores, the pharmaceutical industry and other sectors such as production of electric vehicles. The derivative regulation of Omnibus Law on Job Creation its expecting will creates a more lucrative investment climate in the country.
The investment list consisting of three classifications. First, the the business field as the national strategic program that have capital and labor intensive, high technology, pioneer industry, export orientation, orientation in research, development, and innovation activities. Second, allocated for cooperatives and micro, small and medium enterprises that have a specific process, such as labor intensive and have a cultural heritage.
Third, business fields with certain requirements that can be undertaken by all investment, including cooperatives and MSMEs. From the capital side, the government has determined that foreign investors can only invest in companies that have capital not exceed than Rp10 billion (US$714,286), excluding the value of land and buildings, and must be form a limited liability company.
To attract the capital inflows, the government provided fiscal incentives in the form of tax holidays, tax allowances, and free import duty on imports of machinery and goods and materials for the project construction. In addition, non-fiscal incentives such as business licensing, provision of supporting infrastructure, guaranteed availability of energy and raw materials, immigration, and employment.
Senior economic minister, Airlangga Hartarto, said with the “priority list” there are around 1,700 business fields opened for the investors. He said the investment list will limits foreign investment in certain business sectors to protect local firms against foreign competition. President Joko Widodo’ administration has struggled to attract more investment into the country amid sluggish economic growth and the pandemic.
The investment growth, which accounts for about a third of the country’ GDP, contracted 4.95 percent compared to a year ago, Statistics Indonesia data show. Months ago, President Joko Widodo pledged various stimulus to improve the investment climate, loosening restrictive labor laws and cutting corporate tax rates by produced the Omnibus Law for Job Creation.
Indonesia needs foreign direct investment to narrow its growing current-account deficit, which is now at its biggest since the second quarter of 2014. Indonesia’ CAD widened to US$4.7 billion in 2020, an improvement from a previous year which was a deficit of $30.4 billion.
In the past, Indonesia’s FDI has mostly been in resource-related and consumer sectors, but recently the tech sector has been attracting large investments. According to Alphabet Inc’ Google and Singapore state investor Temasek Holdings Ltd., Indonesia’ internet economy is the region’ largest and fastest-growing, worth $27 billion last year and forecast to hit $100 billion by 2025.
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