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Jakarta Post

6th economic package boosts market confidence: Analyst

  • Marguerite Afra S. and Arif Gunawan S.

    The Jakarta Post

Jakarta   /   Sat, November 7, 2015   /  11:41 am
6th economic package boosts market confidence: Analyst Illustration. (via kompas.com)

Illustration. (via kompas.com)

The 6th economic policy package, focused on developing special economic zones (KEK), is believed to have had a positive impact on the market and the rupiah.

However, the sustainability of its impact will depend on the government'€™s ability to implement its policies effectively, chief market analyst from ForexTime Ltd. Jameel Ahmad told thejakartapost.com on Thursday.

'€œIt will have an immediate impact on the market. But it might be just for a short term, depending on how long it is implemented for. Regardless, it is positive that the government has introduced the package, especially since the currency is taking punishment and [market] confidence is not high,'€ said Ahmad.

While most emerging markets were yet to make any recovery in terms of currency exchange, Ahmad said that the rupiah had rebounded stronger than the ringgit and even stronger than the rupee due to the temporary positive sentiments from the packages.

The national currency rebounded 8.8 percent on Thursday afternoon, to 13,542 per US dollar, after sinking to a 17-year low in September. The ringgit dropped 0.7 percent, to 4.2965 per dollar, in Kuala Lumpur on Thursday.

Coordinating Economic Minister Darmin Nasution said on Thursday that the deregulations aimed to stimulate economic development and manage natural resources in remote areas. Ultimately, he said, they would attract investors and create employment for local workers.

The first part of the package focuses on tax incentives for business, which will be applied across eight KEKs: Tanjung Lesung in Banten, Tanjung Api-api in South Sumatra, Sei Mangke in North Sumatra, Palu in Central Sulawesi, Bitung in North Sulawesi, Mandalika in West Nusa Tenggara, Morotai in North Maluku and Maloy Batuta Trans Kalimantan in East Kalimantan.

According to Darmin, the tax incentives for KEKs included tax holidays, or leniency on income tax for activities involving local natural resources. An investment worth between Rp 500 billion (US$37 million) and Rp 1 trillion with 5 to 25 years'€™ duration, for example, would be incentivized with a tax holiday of between 20 and 100 percent.

Meanwhile, activities that do not involve local natural resources will be eligible for a tax allowance, which is a tax markdown of up to 30 percent for six years.

'€œThese incentives are expected to stimulate local industry clusters that involve natural resources in each [KEK] area. We also aim to develop a synergy between the central and local governments to create a good investment climate,'€ said Darmin, adding that the package would also simplify investment regulations in various areas.

For businesspeople who are working in water-related industries, the second part of the package aims to ensure validity for their water-use permits. The deregulation was issued to follow up the annulment of Law no. 7/2004 on water resources, enabling private investors who owned water-use permits to continue operating.

However, this part of the package stipulates that water provision for citizens must be sustainable and equitable.

The newly announced package will also simplify the permit application process for food and drug production, particularly for importing raw materials, which is overseen by the Food and Drug Monitoring Agency (BPOM). More accessible import certificates (SKI) are expected to lead to increased exports by the food and drug industry.

BPOM is set to develop a single sign-on system, which is a digital platform for businesspeople to obtain permits online. In the long run, SKI permits are expected to be obtainable in less than an hour.

'€œThe economic package is expected to spur enthusiasm for businesspeople, which will help [the government] to provide employment and create better opportunities for the community,'€ said Cabinet Secretary Pramono Agung. (kes)

 

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