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Foreign investment rules may be issued before omnibus laws: Senior minister
Airlangga said the priority list would allow certain business sectors to get fiscal incentives such as tax holidays and super tax deductions.
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Coordinating Economic Minister Airlangga Hartarto addressing the press. (JP/Eisya Eloksari) (Jakarta Post/Eisya Eloksari)
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oordinating Economic Minister Airlangga Hartarto has said that foreign investment rules – namely the priority investment list – may be issued by the government before the sweeping omnibus bills on job creation and taxation pass into law.
Airlangga said the priority list would allow certain business sectors to get fiscal incentives such as tax holidays and super tax deductions. The government would also prohibit 100 percent foreign ownership in small and medium businesses.
“We are still harmonizing [the investment list], and we will provide the priorities to investors so that during the list campaign we do not have to say, ‘These are the sectors that you are not allowed to invest in,’” the minister said at a media briefing in Jakarta on Monday evening.
Read also: Government to liberalize investment in omnibus bill on job creation
The government has long floated the idea of changing the current negative investment list (DNI) to a so-called positive investment list. Currently, the DNI regulates which business sectors are open, prohibited or open with certain conditions to foreign investment.
In the omnibus bill on job creation, the government will open all business sectors to direct investment except those it explicitly declares prohibited from such activity or those that can only be handled by the government.
The prohibited areas are narcotics, gambling, chemical weapons, ozone-depleting substances, coral extraction and fishing for endangered species based on the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
Further details on the investment policy will be regulated in a presidential regulation, the bill states.
The government expects the bill, if passed into law, to cut regulatory red tape and attract more investment into the country to help boost stagnant economic growth. Indonesia’s economy grew by 5.02 percent last year, down from 5.17 percent in 2018, as investment and exports cooled.
Read also: Key points of labor reform in omnibus bill on job creation: What we know so far
President Joko “Jokowi” Widodo's administration has also submitted to the House of Representatives the omnibus bill on taxation, which will lower corporate income tax from the current 25 percent to 20 percent by 2023. The bill will also lower tax penalties, ease income tax regulations for expatriates and work toward taxing multinational digital firms that have no physical presence in Indonesia but that benefit from activities in the local market.
Airlangga said that labor-intensive industries would receive a tax holiday. “For instance, if a company wanted to build a garment factory with 2,000 workers, they would receive a tax holiday.”
The minister added that large investments would also receive similar tax incentives, adding that an investment of US$750 million may allow a company to have a tax holiday for 15 years.
