Thu, 05 Nov 2015

Indonesia plans to invite foreign investors to build and operate special economic zones (SEZs) to boost sluggish economic and job growth in South-east Asia's largest economy.

The country currently has nine SEZs, including the Batam, Bintan and Karimun (BBK)special economic zone, and wants to build seven more in the next five years, said Mr Tamba P. Hutapea, deputy chairman for investment planning at Indonesia's Investment Coordinating Board (BKPM).

Other SEZs in Indonesia include those in Palu, Central Sulawesi province - which house, among others, nickel mining companies and cocoa processing plants - and one in Simalungun, North Sumatra, which groups oil palm plantation companies and logistics firms.

"We will issue a regulation allowing foreigners to manage a special economic zone," Mr Tamba told The Straits Times.

The Jakarta Globe reported yesterday that the government will ease regulations on SEZs in the sixth package of economic policy deregulation that President Joko Widodo is set to announce this week, citing BKPM chairman Franky Sibarani. Foreign nationals would also be eligible for income tax discounts of 20 to 100 per cent.

He earlier told reporters the government needed to invite foreign investors to build and manage SEZs in Indonesia because it had limited funds.

"Foreign investors that have expressed interest to build and manage special economic zones in Indonesia include those from China and Singapore. Papua, Kalimantan and Sumatra are the regions being eyed by the investors," Mr Franky said.

President Joko's administration has pledged to build infrastructure to help spur the economy, create jobs and boost business efficiency. The government's top priorities include building dams and repairing irrigation networks to help farmers boost production, and building power plants to fuel industrial growth.

SEZs in Indonesia offer a range of incentives, including waived tariffs and a simpler process to set up factories. They have attracted significant investment to date. Total investment value in the BBK special economic zone, for instance, was US$8.27 billion (S$11.6 billion) last year, according to the Batam government.

"We will introduce various incentives to attract foreign investments," Mr Tamba told The Straits Times.

On top of the targeted seven additional special economic zones, Tourism Minister Arief Yahya also proposed adding another 10 in Indonesia's main tourism spots.

Previous economic policy deregulation packages included shortening the period to get a business licence and lowering the price of diesel to help industries cut energy costs.

In the next package, according to the chairman of the national development planning agency Sofyan Djalil, the government might also allow foreigners to own landed houses within an SEZ.

Tax holidays that are usually given for as long as 10 years to selected investors would be extended to 20 years, Mr Sofyan added.

Foreign nationals living in Indonesia are currently allowed to buy only apartments.