Indonesia's 12th Stimulus Package also Targets Small & Medium Enterprises
The government of Indonesia plans to unveil its 12th economic stimulus package next week. This 12th package will deal with the simplification of permits for the country's small and medium-sized enterprises. Indonesia's Chief Economics Minister Darmin Nasution said regional governments are still applying regulations designed by the central authorities although policy-making as well as the execution of these policies have been transferred to the regional authorities (in line with the nation's switch to regional autonomy, or decentralization of governance, in the Reformation era).
Nasution said the smoothness of investment and the ease of doing business will improve when efficient and effective execution of regional-specific regulations are conducted by Indonesia's regional authorities. This should lead, for example, to the speeding up of the permit processing time it takes to establish an enterprise that is categorized under the small and medium-sized category.
Part of Indonesia's 11th stimulus package, released last week, also focused on the nation's small and medium-sized enterprises (SMEs). In that package it was mentioned that the Indonesian government will provide subsidized loans for export-oriented SMEs. These loans are divided into working capital loans and investment loans, offered by the state-owned Exim bank (with a 9 percent interest rate).
Minister Nasution said Indonesia's SMEs should be supported in their efforts to overcome several obstacles such as problems related to the quality of human resources, marketing and the difficulty of meeting international trade standards. By offering the SMEs a subsidized loan these companies will have the financial resources to overcome such issues. Currently, Indonesian SMEs sell their products to large companies before export is possible. By encouraging SMEs to export their output directly it is expected to lead to a diversified export market.
Since September 2015 the Indonesian government has released 11 economic stimulus packages aimed at boosting the nation's economic growth through reforms including deregulation and fiscal incentives. Although the contents of these packages are good, there remains uncertainty about about the effective implementation of such reforms in Indonesia as the country has a weak track-record in terms of the full implementation of reforms.
Economic Stimulus Packages of the Indonesian Government:
| Package | Unveiled | Main Points |
| 1st | 9 September 2015 |
• Boost industrial competitiveness through deregulation • Curtail red tape • Enhance law enforcement & business certainty |
| 2nd | 30 September 2015 |
• Interest rate tax cuts for exporters • Speed up investment licensing for investment in industrial estates • Relaxation import taxes on capital goods in industrial estates & aviation |
| 3rd | 7 October 2015 |
• Cut energy tariffs for labor-intensive industries |
| 4th | 15 October 2015 |
• Fixed formula to determine increases in labor wages • Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses |
| 5th | 22 October 2015 |
• Tax incentive for asset revaluation • Scrap double taxation on real estate investment trusts • Deregulation in Islamic banking |
| 6th | 5 November 2015 |
• Tax incentives for investment in special economic zones |
| 7th | 4 December 2015 |
• Waive income tax for workers in the nation's labor-intensive industries • Free leasehold certificates for street vendors operating in 34 state-owned designated areas |
| 8th | 21 December 2015 |
• Scrap income tax for 21 categories of airplane spare parts • Incentives for the development of oil refineries by the private sector • One-map policy to harmonize the utilization of land |
| 9th | 27 January 2016 |
• Single billing system for port services conducted by SOEs • Integrate National Single Window system with 'inaportnet' system • Mandatory use of Indonesian rupiah for payments related to transportation activities • Remove price difference between private commercial and state postal services |
| 10th | 11 February 2016 |
• Removing foreign ownership cap on 35 businesses • Protecting small & medium enterprises as well as cooperatives |
| 11th | 29 March 2016 |
• Lower tax rate on property acquired by local real estate investment trusts • Harmonization of customs checks at ports (to curtail dwell time) • Government subsidizes loans for export-oriented small & medium enterprises • Roadmap for the pharmaceutical industry |