Indonesia Unveils 11th Economic Stimulus Package: a Quick Look
The government of Indonesia unveiled its eleventh economic stimulus package. The country's Chief Economics Minister Darmin Nasution presented the package at the State Palace in Jakarta on Tuesday (29/03). Indonesia's latest stimulus package includes a lower tax rate on property purchased by local real estate investment trusts, the harmonization of customs checks across the nation's ports (curtailing dwell time), government subsidies for loans taken up Indonesia's export-oriented small and medium enterprises, and the drawing of a roadmap for the nation's pharmaceutical industry.
Minister Nasution announced that the Indonesian government will cut the final income tax rate on sales of property to real estate investment trusts (REITs) from 5 percent to 0.5 percent. This tax cut aims at attracting Indonesian funds that are currently invested in Singapore-based REITs. Also Indonesia's land and building rights acquisition duty may soon be cut from 5 percent currently to 1 percent. However, this will also require a regional regulation and therefore the central government cannot provide further information about this topic yet.
Secondly, dwell time at Indonesian ports are targeted to be reduced from 4.7 days to 3.7 days due to the reforming of various procedures particularly the harmonization of customs checks among the port authorities. Currently, there are 18 different governmental institutions active in each port (for example the Transportation Ministry, Tax Office, Quarantine Agency, the Drug and Food Control agency, and 14 more) that all need to give the green light for the import or export of goods. However, it frequently occurs that several institutions give the green light, while several others give the red light. The harmonization of the checks and procedures should encourage a more efficient flow of goods for export and import purposes.
Last month, Indonesian President Joko Widodo said the high dwell time at Indonesian ports have caused losses up to IDR 740 trillion (approx. USD $55 billion) and also drastically curb the nation's competitiveness due to high transportation and logistics costs. In January 2016 dwell time (loading and unloading) at Indonesian ports stood at 4.6 days, a significant improvement from the 6.0 days about a year ago but still high compared to dwell times in Singapore or Malaysia (at roughly 3 days).
Thirdly, the Indonesian government will provide subsidized loans for those Indonesian small and mid-sized companies that are primarily export-oriented. This policy encourages the development of export-oriented industries in Indonesia and will also have a positive impact on the country's trade and current account balances.
Fourthly, a new roadmap - including policies regarding firms' standard operating procedures - is to be drawn up for Indonesia's pharmaceutical industry.
Since September 2015 the government of Indonesia has been releasing a series of economic stimulus packages aimed at boosting the nation's economic growth and improving the investment climate. Previous packages included deregulation, tax incentives for investment, a new formula for minimum wages, and a revision to the Negative Investment List (this document lists the sectors partially or fully closed to foreign investment).
Regarding the revision of the Negative Investment List (Daftar Negatif Investasi) President Widodo is yet to sign the changes. In February it was announced that Indonesia would remove or reduce the foreign ownership cap on 35 businesses (as part of the 10th economic stimulus package). Minister Nasution said it should be signed before the end of the month.
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 |