JAKARTA, KOMPAS - The government launched a new economic package policy on Friday to attract more foreign investment into the country. In addition to resolving the structural problems of the economy, the new economic measures are expected to help cope with the impact of the global economic slowdown and financial turmoil in 2019.
The 16th economic policy package includes the expansion of facilities for corporate income tax reduction, or tax holidays, the relaxation of the negative investment lists (DNI) and a program to increase foreign exchange proceeds from the export of natural resources.
Coordinating Minister for Economic Affairs Darmin Nasution announced the economic package policy at the Presidential Office in Jakarta on Friday during a meeting that was also attended by Industry Minister Airlangga Hartarto and Finance Minister Sri Mulyani Indrawati, Bank Indonesia Governor Perry Warjiyo and the vice chairperson of the Financial Services Authority (OJK) Nurhaida.
The head of the economic department of the Center for Strategic and International Studies (CSIS) Yose Rizal Damuri, who was asked to comment in the new economic measures, said that the 16th economic policy package signaled the government was serious about repairing and reforming the real sector.
The change in the three regulations will complement the central bank’s decision to raise its benchmark interest rates. "The issuance of the policy package may not increase investment overnight, but it gives a positive signal ahead of the 2019 elections," he said.
The government, said Yose, must quickly announce the business sectors that would be withdrawn from or included in the DNI. If it was not immediately issued, it could lead to questions from the business community, which could in turn affect business confidence. The adjustment of the new DNI reflects the openness of the Indonesian economy.
In the16th economic policy package, 95 business sectors are excluded from the DNI and may be 100 percent owned by foreign investors. The business fields include the fabric printing industry, natural tourism, oil and gas construction services, oil and gas drilling at sea, keretek (clove blended) and other cigarettes, dry rubber, art galleries, pharmaceutical medicines and medical devices.
When announcing the new policy package, Darmin said that the global economic conditions were not yet favorable to Indonesia. The slowdown in global economic growth and financial turmoil in 2018 will likely continue in 2019. This was triggered by, among others, the normalization of monetary policy in developed countries, especially the United States, which is likely to continue.
It is still unclear when the US-China trade war will end, although it is expected to subdue, while commodity prices are still volatile, especially of crude palm oil.
Darmin said the government issued the new policy to strengthen faith among investors. With the new economic policy package, more investment both in the form of portfolio and direct investment is expected to enter Indonesia.
Sri Mulyani said the expansion of the tax holiday was expected to further develop both upstream and downstream industries. For this reason, she promised to soon issue a new finance ministerial regulation as a legal umbrella. "With the simplification of the process in obtaining the tax holiday to six months, there will be more than Rp 160 trillion in new investments. With the expansion of business sectors, we hope that the increase in investment will be greater," Sri Mulyani said.
Small and medium enterprises
Edy Putra Irawady, a special staffer at the Office of the Coordinating Economic Minister, gave an assurance that the new investment regulations would not have a negative impact on small and medium enterprises (UKM), which have a net worth of less than Rp 10 billion (about US$685,000). The business scales of foreign investors and SMEs are different, but SMEs can collaborate with foreign investors in the transfer of knowledge, technology and marketing.
According to Iskandar Simorangkir, the deputy for macro and financial economic coordination at the Office of the Coordinating Economic Minister, the change in the DNI is in line with the expansion of the tax holiday facilities. If they meet the criteria as pioneer industries in the business sectors excluded from the DNI, they are encouraged to register to benefit from the tax holiday facilities. (LAS / KRN)