T

he government will this year loosen the criteria for foreign investors to enjoy tax incentives and open new areas of investment in a bid to attract more ventures and sustain growth in the economy.

Coordinating Economic Minister Hatta Rajasa said on Wednesday the government would amend rules on tax incentives and tax allowance and revise the current negative investment list, last amended in 2010.

This revision aims to make Indonesia more investor-friendly and will be introduced in the second half of this year.

'The revision of the tax incentives rules and the negative investment list is part of our efforts to cope with tighter competition in the current global economic situation, in which we are required to find a particular way to maintain growth,' he told reporters at the Trade and Investment Summit in Jakarta.

In the revisions, the government would evaluate, among others, the criteria of companies that could receive tax holidays and tax allowances, the assessment of which would be based on the value of investment and the number of workers employed, Hatta said.

In this new policy, the government would likely allow investors from countries with no tax treaty to enjoy this benefit. The advantage would also be available for firms spending cash to promote research and development here, Hatta said.

The tax holiday, which is an income tax break for five to 10 years, has been available since late 2011 for newly-set up firms investing at least Rp 1 trillion (US$102.59 million) in the base metal, oil refinery and petrochemical, renewable energy, machinery and telecommunication equipment sectors.

In addition to this, the government also offers tax allowances that cut taxable income to 30 percent of total investment realized over six years. This benefit is available for certain labor-intensive industries in remote areas for investments of over Rp 50 billion, covering 129 business areas in the downstream industry, including plantation, real estate and pharmacy areas.

Hatta did not elaborate on the revision of the negative investment list, but earlier, Investment Coordinating Board (BKPM) chief Chatib Basri hinted the new list would relax foreign ownership in investment in the services sector.

The negative list comprises sectors that are partially or totally closed to foreign investment and currently cover areas including pharmaceuticals and specific transportation facilities.

Industry Ministry director for industry climate and quality policy research center Haris Munandar, acknowledged a revision of tax policies was necessary to boost more sizeable investment as so far, there was still little interest from business players to access them.

'We hope the revised rules will be launched in the fourth quarter of this year,' Haris told The Jakarta Post in a text message.

Up to present, the government has granted the tax holiday only to two firms ' Unilever Oleochemical Indonesia, a subsidiary of consumer goods giant Unilever Indonesia, and Petrokimia Butadiene Indonesia, a subsidiary of major domestic petrochemical firm Chandra Asri Petrochemical.

Unilever Oleochemical is building a $133 million refinery to process palm oil into oleochemicals in Sei Mangke, North Sumatra, while Petrokimia Butadiene is constructing a $145 million butadiene plant in Cilegon, Banten, which is set to be the country's first butadiene plant.