THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS PRESS RELEASE Economic Policy Package VI Stimulating the Economy in Outlying Regions, Fair Provision of Water to the Population and Fast-Track Imports of Pharmaceutical Raw Materials Jakarta, 5 November 2015 Today (Thursday 5 Nov), at the Presidential Palace, the government announced yet another Economic Policy Package. Regarding the Economic Policy Package VI, Coordinating Minister for Economic Affairs Darmin Nasution described the launching of 3 deregulation policies as follows: 1. Measures to Stimulate the Economy in Outlying Regions through Development of Special Economic Zones (SEZs) 2. Sustainable and Fair Provision of Water to the Population 3. Paperless Processing of Import Permits for Pharmaceutical Raw Materials 1. Measures to Stimulate the Economy in Outlying Regions through Development of Special Economic Zones (SEZs) Development of SEZs has not met the expectations outlined in Act Number 39 of 2009 concerning Special Economic Zones, which envisages the creation of zones that would attract foreign direct investment and serve to stimulate the economy in regions lacking in development. This is partly the consequence of the absence of incentives and streamlined processing for investment in SEZs. As explained by Coordinating Minister for Economic Affairs Darmin Nasution, a total of 8 (eight) SEZs have been established by government regulation: Tanjung Lesung (Banten), Sei Mangkei (North Sumatra), Palu (Central Sulawesi), Bitung (North Sulawesi), Mandalika (West Nusa Tenggara), Morotai (North Maluku), Tanjung Api-Api (South Sumatra) and Maloi Batuta Trans Kalimantan/MBTK (East Kalimantan).
The Government Regulation has been initialled and sent to Mr Pram (Minister of the Cabinet Secretariat Pramono Anung, ed.) Darmin Nasution told reporters. Of the eight SEZs established by regulation, only 2 (two) SEZs have so far been inaugurated by President Jokowi, both in early 2015. Work on the others is still in progress. The deregulation policy launched today is expected to provide certainty while offering attractive conditions for investors, creating jobs and generating incomes for workers in the individual regions, added Darmin. All these facilities are stipulated in the Government Regulation concerning Facilities and Streamlined Processing in SEZs. Darmin elaborated that the provision of these incentives is expected to promote the expansion and deepening of cluster industries based on the local resources found in each SEZ location. The Government Regulation will also strengthen the integration of efforts by the Central Government and regional governments to create a sound investment climate. For this reason, the Government Regulation will operate effectively if local governments are committed to providing the necessary regional facilities. The material set forth in the Government Regulation will cover the type and size of fiscal incentives and various facilities and streamlined processing in labour, immigration, land management and licensing. Investment in production chains that comprise the focus of an SEZ will benefit from greater incentives compared to investment that is not the focus of the SEZ. The various facilities and streamlined processing to be provided at SEZs include: No. Regulatory aspect Facilities and Streamlined Processing 1. 2. Income Tax (PPh) Import VAT and Luxury Goods Core Activities (Tax Holiday): - Income tax reduction of 20%-100% for 10-25 years where investment value is greater than Rp 1 trillion. - Income tax reduction of 20%-100% for 5-10 years where investment value is greater than Rp 500 billion. Non-Core Activities (Tax Allowance): - Net 30% reduction in income tax over 6 years; - Accelerated depreciation; 10% tax on dividends 5-10 years loss carry-forward Tax: not levied Entry of Goods from other places inside the customs zone to SEZs not levied
No. Regulatory aspect 9. Licensing 3. 4. 5. Customs and Excise Property Ownership for Foreigners Core Activities in Tourism 6. Labour 7. Immigration 8. Land Management Facilities and Streamlined Processing Administrators Goods Shipped have from powers SEZs to to other issue places approvals inside the customs principle and zone business not levied licences via the one-stop-shop in Transactions SEZs between business actors inside an SEZ: Fast-track issuance of licences in no more than 3 hours not levied (subject to meeting requirements) Transactions Application of with licensing business and actors non-licensing in other checklists SEZs: not levied Processing and completion of immigration, labour and From land registration SEZs to domestic formalities market: for licensing import tariffs and nonlicensing provisions purposes of the at Certificate the SEZ Administrator of applying the Origin Foreign persons/foreign legal entities may own residences/properties in SEZs (detached houses or apartment units) Owners of residencies/property will be issued residence permits with the SEZ Management Entity acting as guarantor May be granted exemption from Luxury Goods Tax and VAT on luxury goods May be granted 50%-100% reduction in Development Tax I May be granted 50%100% reduction in Entertainment Tax Wage Council and Special Tripartite Cooperation Agency to be established in each SEZ Only one labour union forum for each company Validation and extension of the Expatriate Manpower Use Plan (RPTKA) in SEZs Extension of Expatriate Work Permits (ITMA) in SEZs Visitor Visa-on-Arrival for 30 days, extendable up to 5 (five) times for 30 days at a time. Multiple-entry visa valid for 1 year Residence permit for foreigners owning property in an SEZ Residence permits for elderly foreigners residing in Tourism SEZs SEZs proposed by the private sector will be granted Building Use Rights (HGB) and extension of the term of these rights will be provided at the same time as the process for issuance of the rights. SEZ administrators may provide land registration services
2. Sustainable and Fair Provision of Water to the Population In Decision No. 85/PUU-XI/2013, the Constitutional Court ruled that Act Number 7 of 2004 concerning Water Resources contravenes the 1945 Constitution of the Republic of Indonesia and has no binding legal effect. To fill the legal void created by the abolition of the law, Act No. 11 of 1974 concerning Water Management was brought back into force. The judgment of the Constitutional Court sets forth six principles that must be observed: Every commercial exploitation of water may not impair, override or dispense with the people s right to water; The State must provide for the people s right to water; Conservation of the environment is a human right; Monitoring and control of water has an absolute character; SOEs/Regional Government Enterprises to have first priority in provision of water as an extension of the state s right of possession; If all these restrictions are complied with and water is still available, the Government will still have the option of issuing licences to private business to undertake provision of water under specific, strict requirements. After considering the six restrictions and to provide legal certainty in management of water resources in regard to commercial exploitation and/or provision of water by businesses investing in Indonesia, the government has developed the Draft Government Regulation concerning Commercial Exploitation of Water Resources and the Draft Government Regulation concerning the System for Provision of Drinking Water. Under the two draft Government Regulations, the government shall continue to honour contracts for cooperation in water resources management until the expiration of these contracts. Nevertheless, the government will strengthen controls over the operation of such cooperation by strengthening the licensing regime for water use in accordance with the mandate of the Constitutional Court ruling. The regulatory scope of the Draft Government Regulation on Commercial Exploitation of Natural Resources includes surface water resources and ground water resources. In this Draft Government Regulation, water resources may be commercially exploited to supply the essential daily needs of the population and small-holder agriculture as long as there is sufficient availability of water. Permits for Commercial Exploitation of Water Resources may be issued to SOEs, Regional Government Enterprises, Village-Owned Enterprises, private companies, cooperatives, natural persons and public-private partnerships. These permits may not be leased or transferred, in whole or in part, to any other party. These permits must pay due attention to social and environmental functions and ensure the safety of state assets and conservation of the environment. Licensing of private business to engage in commercial exploitation of natural resources will continue to observe the principles established in the Constitutional Court ruling, and will be subject to availability of water. Permits for commercial exploitation of natural resources or permits issued for conducting business in surface water resources and permits for commercial exploitation of ground water that were issued before the enactment of the Government Regulation concerning Commercial Exploitation of Natural Resources will remain valid until
these permits expire. The Draft Government Regulation on Surface Water Resources governs the provision of surface water by SOEs, Regional Government Enterprises, Technical Service Units (UPT)/Regional Technical Service Units (UPTD), community groups and private companies for supplying their own needs. With respect for the Constitutional Court ruling, the following norms are stipulated for the private sector role in clean water supply: (1) investment by private companies in development of clean water supply shall encompass activities at raw water units, production plants and distribution units, and (2) management of clean water supply by private companies shall encompass activities at raw water units and production plants. The two norms will provide adequate space or opportunity while continuing to ensure that private business does not gain complete control over all subsystems for provision of clean water supply. The Government Regulation also enables private companies to engage in provision of drinking water for their own needs. Private companies may also work in partnership with SOEs/regional government enterprises on the basis of certain principles. For example, the Water Intake Permit (SIPA) for a private company will be held in the possession of an SOE/Regional Government Enterprise as proof of state involvement. The more detailed regulation will be set forth in the relevant ministerial regulations. 3. Paperless Processing of Import Permits for Pharmaceutical Raw Materials For some time now, the National Agency for Drug and Food Control (BPOM) has been streamlining the import process for pharmaceutical and food raw materials. This streamlining process for licensing was included in the Economic Policy Package Part I, even though the process had not been made fully paperless. Still, the streamlining of the licensing process succeeded in reducing processing times to 5.7 hours. That was achieved with the first deregulation package. That is significant in itself, said Darmin. However, within a short time, BPOM progressively upgraded its online services and was able to reach the target of 100% paperless processing. Without paper, the process can be completed in less than an hour, he added. The online system that is referred to here is the import-export process via the Indonesia National Single Window (INSW) system. The INSW is a single electronic window for completing import and export permits and processing of customs and port documents, established as the result of bureaucratic reforms involving smart public service systems. The INSW offers efficient service and effective control, with all activities and information recorded accurately and transparently, monitored in detail. The system is convenient, fast and economical when calculated by unit cost. (Public Relations, Coordinating Ministry for Economic Affairs)