Govt plans incentives for investment in SMEs

The Jakarta Post, Jakarta

The government is considering providing incentives for foreign companies who want to set up joint ventures with local small and medium enterprises (SMEs), according to Investment Coordinating Board (BKPM) chairman Theo F. Toemion.

"One possible incentive would be tax cuts," Theo told The Jakarta Post on Friday.

He said that such an incentive scheme would be aimed at boosting the role of SMEs in the economy and attracting more foreign companies into the country.

"We are now discussing the plan with the relevant ministries," he explained.

Theo said that the role of SMEs was important to the country's economic development as they employed huge numbers of people and had been relatively unscathed by the 1998 economic crisis.

Theo also said that the investment incentive scheme would be included in the new investment bill, which would be submitted to the House of Representatives for deliberation in February to replace the existing laws on foreign and domestic investment.

Under the proposed draft law, the government will provide equal treatment both to foreign and local investors to boost the country's attractiveness in the eyes of foreign investors.

Theo said that attracting foreign investment was vital as part of the effort to restore the country's ailing economy to health.

Some business players have expressed fears that Indonesia will be unable to compete with its regional peers, particularly Thailand, in attracting foreign investors.