Jakarta mulls old town tax incentives

Mustaqim Adamrah , The Jakarta Post , Jakarta | Mon, 06/16/2008 10:03 AM | City

The city administration is planning a meeting with the Finance Ministry to discuss possible incentives to attract investment in the revitalization of the old town area in West and North Jakarta, an official said on the weekend.

Assistant to the city secretary for public welfare, Aurora Frida Tambunan, said she would soon meet with Finance Minister Sri Mulyani Indrawati and the Finance Ministry's director general for taxation, Darmin Nasution, to discuss tax incentives for investors interested in heritage buildings there.

"It is hard for us to encourage investors to buy those buildings because they require renovation and have conservation and preservation limitations," she said.

She said the cost to renovate a building at the heritage site could be three times higher than sites elsewhere in the city.

"We're considering providing investors with a long-term lease for between 20 and 25 years, as well as tax incentives," Aurora said.

Another incentive being considered by a city-appointed planning review team is a 50 percent discount on land and building taxes, she said.

The provision of incentives for heritage conservation and preservation is common practice in many countries.

Other common incentives are: waiving or reducing building permit fees, waiving zoning and parking requirements, low interest loans, grants and tax breaks.

Reports say many interested investors are reluctant to buy decaying heritage buildings in the area because of current conditions and requirements.

The administration and the state ministry for state enterprises have been brainstorming incentives since February.

The incentives and schemes offered by the city administration have so far failed.

There are 283 preserved buildings at the old town heritage site. There are 15 vacant buildings, situated along West Jakarta's Jl. Pintu Besar Utara through to Jl. Kalibesar.

Bank Mandiri, Bank Negara Indonesia and U.S.-based Standard Chartered Bank's former branch own three of the 15 vacant buildings.

The remaining 12 are owned by state-owned PT Perusahaan Perdagangan Indonesia (PPI) -- a merger between PT Aneka Niaga, PT Cipta Niaga, PT Dharma Niaga and PT Kerta Niaga.

The buildings are under the management of the state ministry.

Robert Tambunan of PPI's asset management division said the company was asking for a State Ministry permit to set up a tender for 12 PPI buildings.

"We held a public tender last year for those buildings but I don't know why investors were not interested," he said.

"We offered the price based on the land property value, not the market value. But costs to conserve and preserve buildings at the heritage site are high while it offers low returns," he said.

Ella Ubaidi, the owner of a heritage building in the area, said negotiations between owners and buyers could be tough.

"The abandoned buildings stand on a land priced at, say, Rp 1 million (US$107.53) per square meter based on land property value," said Ella, who is also a Jakarta Oldtown Kotaku Foundation member.

"But many owners want to sell their properties at a much higher price, otherwise they will suffer losses," she said.

To solve this problem, she said, the government, the administration and investors needed to sit together to develop a well-planned project.

She also said the administration needed to introduce a bylaw to enforce the revitalization project's regulations.

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