Rp221 Trillion Investment for Special Economic Zones

Photo by The Insider Stories

JAKARTA (TheInsiderStories) – The investors’ appetite to invest in the Special Economic Zones (SEZ) is high as it reached Rp221 trillion (US$16.62 billion) in the first half (H1) of 2017, said deputy for the Acceleration of Infrastructure and Regional Development of the Coordinating Ministry for Economic Affairs Wahyu Utomo.

Almost 73 percent of the committed investment, He said, is in the area of Tanjung Api-api in South Sumatera, Banyumas Regency in Central Java, and remaining are spread to 10 other regions. By 2030, the investment target of SEZ is to almost triple, projected at Rp726 trillion.

SEZ is the areas targeted for Regional Development through Nawacita, the President Joko Widodo’s nine priority programs, which aim to increase productivity and competitiveness. SEZ is targeted to absorb 632,583 workers.

SEZ is regulated under Law No. 39/2009 on Capital Investment which goals are to boost capital investments, to optimize industrial activities/export/import/ other high value economic activities, to accelerate regional development by developing new centers of growth and balancing inter-regional development and finally to create jobs in industry, tourism and trade sectors.

Wahyu explained, SEZs development is focused to become prime movers for the regional economy where each has its master plan of development and the Government wants investors ready to invest after the zone being determined. The regional governments are urged to provide incentives while the central government will focus on developing infrastructure.

SEZ will be provided with areas or locations with accessibility to global market via seaports and airports, in addition to be granted certain fiscal and non-fiscal incentives both from central and regional governments. As a result, the region’s competitiveness will boost Indonesia’s by attracting investors to invest in the area.

Fiscal incentives for SEZ include tax holiday, tax allowance, non-income tax imposed to import, no value-added tax imposed (also for luxury goods), 10 percent income tax for dividend and loss compensation for 5-10 years.

Attractive tax holiday (20-100 percent reduction in PPH) for business entities with core business in investment are tiered based on and size of investments. Investment above Rp1 trillion will enjoy 10-25 year tax holiday. Whilst 5-15 year tax holiday will be granted for investment of Rp500billion and above and investment for certain activities of Rp500 billion.

Investors will enjoy tax allowance to business activities outside main business of SEZ (other activities), consisting of the reduction of net income by 30 percent for six years, accelerated depreciation, income tax of 10 percent imposed to dividend and the compensation of loss for 5-10 years.

Non Fiscal incentive facilities for SEZ are not include in negative list for investment, ease of permits for immigration, land, manpower, the facility of traffic of goods, the property ownership for expatriates in tourism area and the ease of permits for capital investment (serving within 3 hours).

Enoh Suharto, secretary of SEZ board, noted that Tanjung Lesung and Sei Mangkei have been in operation, while six SEZs set to commence operation this year are such as Bitung, Palu, Mandalika, Tanjung Api-api, Moratai, and Maloi.

The Government focuses on developing 11 SEZ areas in 2017 with the following committed investments:

1) Tanjung Api-api, Banyumas regency (South Sumatera) – Rp161.7 trillion

2) Sei Mengkei (North Sumatera) – Rp10.8 trillion

3) Arun Lhoksumawe (Aceh) – Rp100 billion

4) Tanjung Kelayang (Bangka Belitung) – Rp13.8 trillion

5) Tanjung Lesung, Padeglang (Banten) – Rp8.2 trillion

6) Mandalika, Central Lombok (NTB) – Rp16.2 trillion

7) MBTK, Kutai Timur (East Kalimantan) – Rp8 trillion

8) Palu (Central Sulawesi) – Rp328 billion

9) Bitung (North Sulawesi) – Rp2 trillion

10) Morotai (North Maluku) – Rp95 billion

11) Sorong (West Papua) – Rp25 billion

SEZ areas under the government’s study for development are :

1) Kuala Tanjung in North Sumatera with investment plan of Rp94 trillion

2) Asam Karimun island, Riau Islands (Rp10 trillion)

3) Merauke, Papua (Rp926 billion)

4) Melolo, NTT

5) Tourism area in Bangka island

6) Nongsa, Batam

There are 26 SEZs developed by 2016, two areas in 2012, wight in 2014 and 10 in 2016. In 2019, the Government targets to develop 25 SEZ areas including 14 new areas. The Government is now set to develop Galang Batang SEZ in Riau Islands with investment plan of Rp36.25 trillion.

18 companies invest almost Rp30 trillion so far of which 85 percent is by 7 top companies are ProCone Gmbh Rp8 trillion, Roadgrip Indonesia & MRK – Circuit Moto GP Rp6 trillion, Alternative Protein Indonesia Rp5.7 trillion, PT Unilever Oleochemical Indonesia Rp2 trillion, PT Perusahaan Resort Indonesia Amerika (Paramount Hotel) Rp1trillion, PT industry Nabati Lestari Rp1 Trillion, and ITDC Properti Club Med Motel Rp1 Trillion. Other investment commitments are Rp51 trillion.

Other companies are :

1) PT Lees International Development – Rp250 billion

2) ITDC Properti (Pullman Hotel) – Rp600 billion

3) PTPN III (palm oil nucleus) – Rp76 billion)

4) PT Perusahaan Air Indonesia Amerika – Rp300 billion

5) Palembang CMA Refinery – Rp149 billion

6) PTPN III (CPO and nucleus) – Rp255 billion

7) PT Banten West Java – Rp870 billion

8) Mongolian Culture – Rp25 billion

9) Elmar Mitra Perkasa (X2 Hotel) – Rp400 billion

10) Setra Gita Nusantara (Sheraton Hotel) – Rp418 billion

11) PT Hypatia Karya Pratama – Sofitel Hotel (Rp400 billion)

(Written by Linda Silaen, Email: linda.silaen@theinsiderstories.com)