Understanding the Incentive of Investment to Increase Investment


The ASEAN Economic Community (MEA) is a new chapter for Indonesia and other South East Asian countries. One of the conveniences gained from MEA is the ease of investing. Since it has become easier to invest in ASEAN countries, inevitably, there will be a fierce competition that cannot be avoided. ASEAN countries including Indonesia, are competing to attract investors to invest. If not, they will need to promptly clean up and do their best to increase investment. Indonesia will not lose in the competition and come behind in terms of economic growth.

For this purpose, the Indonesian government provides incentives to ease investors developing their business. This is known as the Tax Holiday facility, tax incentive, and permit simplification, all done through policy packages issued by the government. Additionally, there is another facility exemption for import duty imposed for machinery. This policy is extremely useful for investors that are just starting construction so that no extra cost will be needed to bring in machinery from overseas.

Next, for Tax Allowance facility, which is provided by the government, will bring ease by reducing net income of businesses with a net income amount to 30% of their investment value. These reductions are given within the period of six years, with an annual average of 5% annually. The government also provides relief in the form of accelerated depreciation and amortization.

The government has done quite a lot of deregulation and cutting the number of permits needed by investors in terms of easing the investment process should they wish to make an investment. Now, through One Stop Service (OSS) in BKPM, various licensing and non-licensing that should actually be managed by a variety of government agencies has been delegated to BKPM to accelerate processing time.

Unfortunately, the involvement of the private sector to invest is still considered minimal and has not reached the stage as per expectation, particularly investments in the infrastructure sector. The private company is still considered to rarely participate. According to Thomas Lembong, the Chairman of BKPM, the lack of private parties involved in infrastructure investments is due to the fact that the government rarely relies on the private sector and still holds onto the budget. It also has to be considered that the government gives minimal incentive for such affairs. Whereas for Thomas, investors are looking for profit, so the government should be stingy when it comes to giving out incentives. As without the participating of private sectors in the investment business, it will be difficult to achieve maximum economic growth.

BKPM promised to continue being the coordinator of investment and to remind government and private investors to cooperate with one another in business investment. This is not just in terms of projects but in other ways too such as tax policies. Also, for the government to provide tax incentives in the form of tax relief for industries, such as telecommunications, maritime, agricultural processing and downstream metal production. Currently, the government provides tax reductions (Tax Holiday) ranging from 10% to 100% for companies that meet certain requirements. This incentive started in August 2016 intended for industries to adopt new technologies so that there will be added value and strategic value for the national economy.

Source : BKPM