Experts laud planned tax incentives

JAKARTA (JP): Investment and trade consultants hailed the government's plan on Saturday to provide new tax incentives in order to boost the inflow of foreign direct investment into the country.

But they said that providing tax incentives would not work in attracting foreign investors if the government failed to create political stability in the country.

"The bottom line is, the government can not solely depend on a tax incentive scheme to attract investors. It should also create a conducive climate for investment," said Johan Bukit, a director of IndoTrade trade and investment consulting company.

Bukit said the most important thing for the government was how to create political stability, impose a proper fiscal policy and eliminate all red tape.

State Minister of Investment/chairman of investment planning board (BKPM) Marzuki Usman said on Friday he would propose an amendment to the existing tax law to pave the way for the issuance of a tax holiday to investors.

Marzuki said without the tax holiday, Indonesia would no longer be attractive to foreign investors.

Besides preparing the tax holiday, the government would also empower provincial investment offices (BKPMD) to issue investment permits in an attempt to lure investors.

As part of the incentives to draw wary foreign investors, the government is also considering allowing foreigners with a total investment of at least US$1 million to obtain permanent resident status, which would free them from visas to enter the country.

According to BKPM, foreign direct investment approved by the government in the first half of this year dropped 77.5 percent to $1.88 billion from $8.35 billion in the corresponding period last year.

However, the number of approved foreign investment in the same period rose 7.5 percent to 518 projects from 482 projects.

"This phenomenon proves that investment in the country is not dead, it's just changing its form," Bukit said, adding that he recognized a shift in investors' interests from large-scale projects in previous years to medium-scale projects.

Bukit said many investors still complained that the regulations were not fully implemented, there was a lack of consistency and it was confusing despite the government's strong commitment in boosting foreign investment. (01)