T

he government is preparing a number of fiscal incentives to encourage the development of industrial estates outside Java.

Revised regulations, slated to take effect at the end of this month, aim to attract investment and speed up the construction of industrial estates in regions outside of the country'€™s most populous island.

Imam Haryono, the Industry Ministry'€™s director general for industrial estate development, said on Monday that his office was currently revising Government Regulation No. 24/2009 concerning industrial estates, so that investors intending to develop industrial estates would be able to receive tax reductions both from the central government and local administrations.

'€œThe core aim of the revision is to attract [investment] and spread industrial development [across the archipelago],'€ he said.

He explained that the fiscal incentives to be provided by the central government would be in the form of reductions in or exemption from corporate income tax (PPh), import duties and value-added tax (PPN), to name a few.

Meanwhile, fiscal incentives at the local level would include reduced local taxes and levies, such as property transfer fees (BPTHB) and land and property tax (PBB), or total exemptions.

In addition to fiscal incentives, the government would also ease the procedures and requirements for obtaining electricity, he added. '€œTo spread out estate locations nationwide, we have arranged in the revision that different fiscal incentives will apply based on the industry development areas,'€ Iman said.

The ministry differentiates between four industry development areas (WIPs), with Java considered to be developed in terms of the WIP classification. Northern Sulawesi, eastern Kalimantan, southern Sumatra and northern Sumatra, except for Batam, Bintan and Karimun, are considered to be developing, while potential I WPI areas are western Kalimantan, Bali and Nusa Tenggara, and potential II WPI areas are Papua and West Papua.

Imam said that the potential II WPI areas would get the most benefits, followed by the potential I, developing and developed WPI areas.

The administration of President Joko '€œJokowi'€ Widodo aims to build at least 14 industrial estates outside the main island of Java within five years to spur economic growth in all parts of the country.

The government estimates that this will require total investment of Rp 192.44 trillion (US$14.25 billion) by 2019. Covering an area of 22,484 hectares, the industrial estates are expected to generate 930,000 jobs. The government plans to allocate state funds of Rp 55.45 trillion for the construction of basic infrastructure, such as roads and seaports.

Indonesian Industrial Estate Association (HKI) chairman Sanny Iskandar estimated Monday that the demand for industrial estate space would amount to 400 hectares by the end of this year, lower than last year'€™s 450 hectares.

Imam said that the government'€™s long-term plan was to increase the proportion of state-run industrial estates to more than 50 percent of total estates, up from the current 6 percent, through public service agencies (BLU), state-owned enterprises (BUMN) and local-government-owned enterprises (BUMD).

The government recently issued several economic policy packages aimed at improving business regulations and cutting red tape in licensing processes to attract more investment.

One of the policies is the three-hour licensing service at the Investment Coordinating Board (BKPM) for investment projects worth more than Rp 100 billion and/ or employing at least 1,000 workers. For projects in industrial estates, the BKPM allows construction and license procurement to be done simultaneously.

BKPM deputy for investment planning Tamba Hutapea said on Monday that his office had talked to the administrations of East and Central Java about the estates.

'€œWe will talk with the Banten and West Java administrations soon,'€ he said.

The BKPM recently announced that year-to-date (ytd) investment realization stood at Rp 400 trillion, more than 70 percent of this year'€™s target of Rp 519.5 trillion.

The data also showed that all prioritized sectors saw rising investment, but labor-intensive industries, such as textiles, footwear, furniture and food and beverage, saw a 13.4 percent drop. (prm)