Indonesia, Singapore Tightens Economic Cooperation in Energy, Tourism and DIgital Economy

JAKARTA (TheInsiderStories) – During his visit with Singapore PM Lee Hsien Loong, Indonesia’s President Joko Widodo discussed potential investment as well as issues of tourism, energy and digital economic relationship between the two countries.held one-on-one meetings with local companies, Foreign Affairs Minister Retno Marsudi revealed today (7/9).

According to her, after attending a formal meeting with PM Lee, the President joined in the Singapore-Indonesia Business Investment Forum, held in Marina Bay Cruise Center.  This event also marked the 50th
bilateral relationship between the two countries. Indonesia and Malaysia are two of five founders of South East Asia region.

To attract more investment, the Indonesian government has decided to extend Singaporeans a more updated tax incentive as a sweetener. The Double Tax Agreement or Tax Treaty currently in force has not been updated for the last 30 years.

The Government expressed its openness to any idea to improve the investment climate in Indonesia. This is relevant as Singapore has become the biggest investor in Indonesia, bringing in some US$9.2 billion last year, for a total of 5,874 projects.

In 2016, both countries also established Kendal Industrial zone, central of Java that pull US$500 million investment from 32 companies and creates 4,000 jobs in the region. Government and investor plan to establish
polytechnic to support projects in the industrial zone.

Singapore had previously requested its Infrastructure Hub Team to finance infrastructure investment in Indonesia. The Hub Team, a unit that promises to position Singapore as a location to attract international banks and funding, will then be able to channel such funds into infrastructure projects.

The Indonesian Government has admitted that current tax incentives are insufficient to attract new investors. Tax incentive facilities, including tax holidays, tax allowances, requirements for easing the Special Economic
Zones and Industrial Zones, income tax and value-added tax exemptions have been accessed by only five companies since the government promoted them in 2005.

“We are prepared to remove all constraints, whether from regulations or companies themselves. Even constraints apart from tax, as we identify them,” the Indonesian Minister of Finance, Sri Mulyani said recently.

Tax holidays reduce income tax from 10 to 100 percent for five to fifteen years, and can be renewed for up to 20 years. This facility is given for new investments of at least Rp1 trillion.

Meanwhile, a tax allowance is extended to 64 business sectors, where companies get a 30 percent income tax reduction, plus accelerated amortization and revaluation, as well as a 10 percent income tax reduction on foreign dividends.

Digital Economy Cooperation

The President also proposed Batam free trade zone as an ideal location to develop the digital economy, including building a digital park cluster in Nongsa Batam, a start-up incubator, and a ‘training for trainers’ program for IT workers and teachers.

In addition, President and PM Lee agreed to expand investment in tourism, including developing new joint destinations, cooperation in cruise operations, cruise port development as well as developing Meeting,
Incentives, Conferences and Exhibitions (MICE). They believe the establishment of an Indonesia-Singapore Business Council last July will go far toward boosting business relationships between the two countries.

Writing by Yosi Winosa, Email :