There is a current trade deficit in Indonesia where imports continue to rise against exports. The government raised import taxes on 1,140 types of goods in order to make up for the imbalance. However, according to Moody’s, Indonesia’s GDP outlook remains stable considering the steady support of private consumption and a pickup in export growth.
The depreciation of the Rupiah is said to stimulate investments since Indonesian stocks and securities are highly undervalued. The latest OECD report for November 2018 sees this exchange rate depreciation as one way of curbing imports and increasing export competitiveness. More investments in the export sector and raw material production are also needed to tackle the trade gap.
Despite lower exports amid US-China trade tensions, improvement in infrastructure regulations and connectivity are seen to deliver gains in the market share. Regulatory corrective measures associated with the Viability Gap Funding (VGF) and availability payment are geared toward attracting investment of business entities. The Indonesia Infrastructure Guarantee Fund (IIGF) was established to arrange government guarantees for public-private partnership (PPP) projects.
Indonesia’s new tax holiday policy is included in the country’s latest economic package which covers the expansion of business sectors. Two sectors available for investment are added including digital economy industry, and manufacturing industry in agriculture and forestry or plantations. Under this scheme, 169 business units listed in the Indonesian Standard of Industrial Classification (KBLI), up from the previous 153 business units, are now eligible to apply for tax holiday.
Furthermore, the “mini tax holiday” scheme allows an investor to get a 50 percent corporate income tax cut for five years. A minimum investment of IDR 100 billion (US$7 million) is required to get this tax holiday.
Another tax regulation is also being eyed regarding investments in Indonesia’s growing special economic zones (SEZs).
(source: ASEAN briefing)