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Ada Pertanyaan? Hubungi Kami Ari Pramuditya, Fitri Novia Heriani
President Joko Widodo. Photo by: RES
The Joko Widodo Administration recently announced the seventh of its Economic Policy Packages. The latest package is part of a series of policies formulated by the government in response to the global economic slowdown, which is also hitting Indonesia quite severely.
The Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal – “BKPM”) is optimistic that this seventh Economic Policy Package will ultimately have a positive impact on the labor-intensive investment sector and hopefully increase its competitiveness.
Three main initiatives are set out in the new policy package, and these are closely related to the improvement of the country’s labor-intensive industries, particularly as regards their competitiveness. First up is a tax-allowance incentive for the garment and footwear industries. The second initiative concerns income-tax reductions for the same industries. And a third initiative offers three-hour investment-license processing.
Franky Sibarani, Head of the BKPM, stated that the latest policy package, which was announced by the Coordinating Minister for Economic Affairs, Darmin Nasution, demonstrated the government’s commitment to the labor-intensive sector. The package itself, according to Sibarani, is the result of the government’s various discussions with investors, who expressed their concerns regarding Indonesia’s competitiveness, as compared to other countries, and asserted that this problem was primarily due to high production costs.
“This new policy package is expected to have a positive impact, not only on existing investors, who have been experiencing a number of problems of late, but also on attempts to attract new investment, as well as the expansion of labor-intensive sectors,” Mr. Sibarani affirmed in a press release which was received by hukumonline on Saturday 5 December 2015.
According to Mr. Sibarani, companies which employ a minimum of 5000 workers will be eligible for the income-tax reduction facility. These companies should submit a list of their employees, as well as their latest production figures, 50% of which should consist of exports.
“This facility will be granted for taxable income of up to IDR 50 million per year and the facility remains valid for two years, after which time it will be reevaluated and possibly extended,” Sibarani stated.
Sibarani also added that the tax-allowance incentives will require changes to be made to Government Regulation No. 18 of 2015 on Income-Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions.
“With the tax allowance, companies will be eligible for an income-tax allowance of 5% of each year’s total investment value, and this allowance remains valid for six years,” Mr. Sibarani outlined.
Furthermore, during his communications with representatives from the Indonesian Textile Association (Asosiasi Pertekstilan Indonesia – “API”) and the Indonesian Footwear Association (Asosiasi Persepatuan Indonesia – “Aprisindo”), Mr. Sibarani learnt that the country’s garment and footwear manufacturers were eagerly anticipating the introduction of the new income-tax incentives facility and would be looking to take advantage of such a scheme as soon as possible.
In addition, these industries have also stated their readiness to provide the comprehensive employee lists required of businesses in order that they be considered eligible for the new tax incentives, as all employees are now required to participate in the BPJS Labor (Badan Penyelenggara Jaminan Sosial Ketenagakerjaan) and BPJS Health (Badan Penyelenggara Jaminan Sosial Kesehatan) programs.
The export value of Indonesia’s textile industry amounted to some USD 5.56 billion in 2014, while the footwear industry posted a total of USD 2.99 billion. Growth within the textile sector during the first semester of 2015 increased significantly by 613% over the same period the previous year, and totaled IDR 759 billion.
Meanwhile, during the first half of 2015, Indonesia’s footwear industry posted a 58% increase over the same period the previous year for a combined total of IDR 3.88 trillion.
In terms of investment, between January and September 2015, the textile and footwear sector posted a combined investment realization of IDR 11.55 trillion, which consisted of IDR 9.8 trillion from the textile sector, an increase of 148% over the same period the previous year, and IDR 1.6 trillion from the footwear sector, a decrease of 35% compared with the same period the previous year.
The textile and footwear industries currently absorb 106,103 effective laborers, which is 6.2 times the level of any other sector. This is equivalent to 17,124 workers being employed per IDR 1 trillion of investment made in this sector of the economy.
The Coordinating Minister for Economic Affairs, Darmin Nasution, previously stated that the announcement of the policy package aimed at supporting domestic industries was the result of a direct request from President Joko Widodo, as it had been some three weeks overdue.
Through the new policy package, the BKPM is also hoping to offer an increased total of eight kinds of licenses to investors, all with a processing time of just three hours. In addition, the government is also offering income-tax incentives on income of up to IDR 50 million to companies working in labor-intensive industries.
“Previously, four types of licenses could be obtained within the three-hour window, but now this total has increased to eight, and these also incorporate income-tax incentives for employees who have been working in labor-intensive industries for two years. This facility is being offered to anyone who has a taxable income of up to IDR 50 million,” explained Mr. Nasution on Friday, 4 December 2015.
Indonesia’s Minister of Agrarian and Spatial Planning, Ferry Mursyidan Baldan, stated that the government would also offer a facility which will allow street vendors to obtain Building Exploitation Permit (Hak Guna Bangunan – “HGB”) certificates, and that this process will be coordinated by local governments. This new facility will be launched in late December 2015 in Banten, and as many as 34 Indonesian regions have already registered for the program.
“This facility is also currently in process and scores of street vendors across the relevant areaswill have their stalls measured before their HGBs are issued. This should reassure vendors and offer them some security. Up until now, 34 areas have already been registered, and we will be launching this facility in Banten this December,” Mr. Baldan explained.
(sp)
Ari Pramuditya, Fitri Novia Heriani
President Joko Widodo. Photo by: RES
The Joko Widodo Administration recently announced the seventh of its Economic Policy Packages. The latest package is part of a series of policies formulated by the government in response to the global economic slowdown, which is also hitting Indonesia quite severely.
The Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal – “BKPM”) is optimistic that this seventh Economic Policy Package will ultimately have a positive impact on the labor-intensive investment sector and hopefully increase its competitiveness.
Three main initiatives are set out in the new policy package, and these are closely related to the improvement of the country’s labor-intensive industries, particularly as regards their competitiveness. First up is a tax-allowance incentive for the garment and footwear industries. The second initiative concerns income-tax reductions for the same industries. And a third initiative offers three-hour investment-license processing.
Franky Sibarani, Head of the BKPM, stated that the latest policy package, which was announced by the Coordinating Minister for Economic Affairs, Darmin Nasution, demonstrated the government’s commitment to the labor-intensive sector. The package itself, according to Sibarani, is the result of the government’s various discussions with investors, who expressed their concerns regarding Indonesia’s competitiveness, as compared to other countries, and asserted that this problem was primarily due to high production costs.
“This new policy package is expected to have a positive impact, not only on existing investors, who have been experiencing a number of problems of late, but also on attempts to attract new investment, as well as the expansion of labor-intensive sectors,” Mr. Sibarani affirmed in a press release which was received by hukumonline on Saturday 5 December 2015.
According to Mr. Sibarani, companies which employ a minimum of 5000 workers will be eligible for the income-tax reduction facility. These companies should submit a list of their employees, as well as their latest production figures, 50% of which should consist of exports.
“This facility will be granted for taxable income of up to IDR 50 million per year and the facility remains valid for two years, after which time it will be reevaluated and possibly extended,” Sibarani stated.
Sibarani also added that the tax-allowance incentives will require changes to be made to Government Regulation No. 18 of 2015 on Income-Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions.
“With the tax allowance, companies will be eligible for an income-tax allowance of 5% of each year’s total investment value, and this allowance remains valid for six years,” Mr. Sibarani outlined.
Furthermore, during his communications with representatives from the Indonesian Textile Association (Asosiasi Pertekstilan Indonesia – “API”) and the Indonesian Footwear Association (Asosiasi Persepatuan Indonesia – “Aprisindo”), Mr. Sibarani learnt that the country’s garment and footwear manufacturers were eagerly anticipating the introduction of the new income-tax incentives facility and would be looking to take advantage of such a scheme as soon as possible.
In addition, these industries have also stated their readiness to provide the comprehensive employee lists required of businesses in order that they be considered eligible for the new tax incentives, as all employees are now required to participate in the BPJS Labor (Badan Penyelenggara Jaminan Sosial Ketenagakerjaan) and BPJS Health (Badan Penyelenggara Jaminan Sosial Kesehatan) programs.
The export value of Indonesia’s textile industry amounted to some USD 5.56 billion in 2014, while the footwear industry posted a total of USD 2.99 billion. Growth within the textile sector during the first semester of 2015 increased significantly by 613% over the same period the previous year, and totaled IDR 759 billion.
Meanwhile, during the first half of 2015, Indonesia’s footwear industry posted a 58% increase over the same period the previous year for a combined total of IDR 3.88 trillion.
In terms of investment, between January and September 2015, the textile and footwear sector posted a combined investment realization of IDR 11.55 trillion, which consisted of IDR 9.8 trillion from the textile sector, an increase of 148% over the same period the previous year, and IDR 1.6 trillion from the footwear sector, a decrease of 35% compared with the same period the previous year.
The textile and footwear industries currently absorb 106,103 effective laborers, which is 6.2 times the level of any other sector. This is equivalent to 17,124 workers being employed per IDR 1 trillion of investment made in this sector of the economy.
The Coordinating Minister for Economic Affairs, Darmin Nasution, previously stated that the announcement of the policy package aimed at supporting domestic industries was the result of a direct request from President Joko Widodo, as it had been some three weeks overdue.
Through the new policy package, the BKPM is also hoping to offer an increased total of eight kinds of licenses to investors, all with a processing time of just three hours. In addition, the government is also offering income-tax incentives on income of up to IDR 50 million to companies working in labor-intensive industries.
“Previously, four types of licenses could be obtained within the three-hour window, but now this total has increased to eight, and these also incorporate income-tax incentives for employees who have been working in labor-intensive industries for two years. This facility is being offered to anyone who has a taxable income of up to IDR 50 million,” explained Mr. Nasution on Friday, 4 December 2015.
Indonesia’s Minister of Agrarian and Spatial Planning, Ferry Mursyidan Baldan, stated that the government would also offer a facility which will allow street vendors to obtain Building Exploitation Permit (Hak Guna Bangunan – “HGB”) certificates, and that this process will be coordinated by local governments. This new facility will be launched in late December 2015 in Banten, and as many as 34 Indonesian regions have already registered for the program.
“This facility is also currently in process and scores of street vendors across the relevant areaswill have their stalls measured before their HGBs are issued. This should reassure vendors and offer them some security. Up until now, 34 areas have already been registered, and we will be launching this facility in Banten this December,” Mr. Baldan explained.
(sp)