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INDONESIA: Revised Regional Investment Incentive Regime Implemented

The government has issued revised guidance for the granting of investment incentives by local authorities in the country’s regions, including its cities, regencies and provinces. At present, the regional investment incentives on offer include exemption from/reduction of local taxes and levies; funding support; infrastructure support; assistance in securing land; technical assistance; and the expedited issuance of local permits. The changes, enacted as Government Regulation No.24/2019, are intended to widen the scope of the existing provisions first introduced via Government Regulation No.45/2008.

In particular, the updated regulations provide detailed guidance to local authorities with regard to the granting of tax incentives to investors, including provisions for waiving a range of local levies. They also, for the first time, detail the required provisions for providing assistance to SMEs in the form of research and development grants, vocational training support and low-interest loans. In terms of local government support for company set-up, the latest regulations expand the number of services on offer from five to 13. The new measures include the facility to provide investors with access to local data on investment opportunities; assistance in land acquisition; streamlined licence issuance procedures via integrated one-stop services; technical assistance for securing required certifications and compliance with local standards, and access to locally-sourced raw materials and human resources.

Within a 12-month period, the regional investment authorities must issue by-laws detailing the specific incentives on offer within their jurisdiction and outline the associated eligibility criteria, procedures for availing such incentives and their duration/validity period. While an existing provision requiring the heads of regional investment authorities to submit an annual progress report to the central government will remain in force, regional investment officials will now also be subject to increased supervision by the central government in order to ensure the effective implementation of relevant regional investment incentives.

The revised guidance has been issued as part of a government bid to boost investment and improve the ease of doing business in the country’s regions. This, in turn, is expected to promote regional development, boost economic growth and improve the country’s overall investment climate. The measures also come in the wake of Indonesian President Joko Widodo’s recent directive to regional investment officials to address the existing problems with regard to properly facilitating foreign direct investment (FDI) across the country.

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