Sat, 04 Aug 2007
From: The Jakarta Post
By The Jakarta Post, Jakarta
The government will combine a number of incentives to be extended to the business sector into a single regulation so as to reduce bureaucracy and prevent overlapping, a senior official says.

M. Ikhsan, an assistant to the Coordinating Minister for the Economy, said Thursday that the issuance of a single regulation would be needed so that the fiscal incentives and investment facilities provided under the new Investment Law and proposed under the income tax bill (which is still being deliberated by the House of Representatives) would not overlap with each other.

Currently, the tax breaks extended to designated business sectors are set out in Government Regulation No. I of 2007. However, a number of fiscal incentives to be provided under the newly enacted Investment Law and the proposed Income Tax Law could overlap with those provided for by the Government Regulation.

"Therefore, the government will likely combine all the incentives and facilities into one government regulation," Ikhsan said.

The proposed regulation would be reviewed every six months so as to see whether the designated sectors should continue to be given incentives.

He added that the proposed regulation would comply with the recently-issued negative investment list.

In July, the government issued its latest so-called negative investment list, which provides a more comprehensive description of which business sectors are closed to foreign investment.

The list increases the number of off-limits sectors to 25 from the previous 11 on the grounds that this is necessary to protect the national interest in such areas as public health, the environment, culture and natural biodiversity. It also prioritizes 43 sectors for small and medium enterprises.

Other sectors will, however, be opened up wider to foreign investment than was the case before. Under the new rules, non-national investors will be allowed to take controlling stakes in banks (up to 99 percent), the power sector, oil and gas industry, tollway operators, water companies, agriculture and plantation firms (95 percent), insurance firms (80 percent), the pharmaceutical industry (75 percent), health services (65 percent) and construction (55 percent).

In the telecommunications sector, foreign investors will be allowed to own up to 65 percent of cellular operators, but only 49 percent of fixed-line phone companies.



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