Investment Incentives to Prioritise Labour-Intensive Sectors and Renewable Energy to Absorb Workforce

The government will change its approach to providing fiscal incentives, placing greater emphasis on investments that can create employment opportunities, particularly in labour-intensive sectors and renewable energy (EBT). According to the Minister of Investment and Downstreaming/Head of the Investment Coordinating Board (BKPM) Rosan Perkasa Roeslani, fiscal incentives have previously been largely directed towards investments in capital-intensive sectors, such as the nickel industry, which forms part of the national downstreaming strategy. However, going forward, this policy direction will be evaluated in line with the formation of industrial ecosystems in those sectors. He explained that the main focus ahead will be on the effectiveness of incentives in creating added value, including workforce absorption. Rosan also stressed that investments in the renewable energy sector are a priority due to their high potential for job absorption. The government, he said, is open to providing incentives for investments that deliver broad economic impacts, even if the investment value is not particularly large. “Our parameters are not solely based on the size of the investment, but also on how much workforce it absorbs. That is a very important consideration in providing fiscal incentives going forward, and labour-intensive sectors are also something we are paying attention to,” he clarified. He cited as an example an investment in Morowali worth around US$100 million that can absorb up to 10,000 workers. In his view, although the investment value is relatively small, the impact on job creation is very significant and warrants consideration for incentives. Rosan also affirmed that future incentive policies will be more selective and impact-based, particularly on job creation and contributions to inclusive economic growth. This policy is expected to serve as a positive driver for the investment climate in Indonesia, while also providing a concrete solution to curbing unemployment rates. From the realisation of those investments, workforce absorption reached 706,569 people. This figure surged by 18.9% year-on-year, a sharp increase compared to absorption in Q1-2024, which was at 594,104 people.