Indonesia Special Economic Zone Regulations To Promote Growth Center Investments

Indonesia election countdown clock
A man walks in front of a countdown clock decoration for the upcoming general election at Bundaran Hotel Indonesia roundabout in Jakarta, Indonesia, April 6, 2019. Picture taken April 6, 2019. (Photo: REUTERS/Willy Kurniawan)

Two regulations on special economic zones (KEKs) have reached its final stage of revision as the Indonesian government aims to promote increased investments in business growth centers spread across the country.

Secretary to Indonesia's Coordinating Economic Minister, Susiwijono Moegiarso, was quoted to have confirmed on Thursday that final revisions will be completed this week. Susiwijono added that the government wants to facilitate easier business processes for investors interested in the KEK scheme.

Revisions on the draft proposal had to be made due to inadequate details on fiscal incentives. The revised edition is expected to have added information on tax allowances and tax holidays among participating businesses in the KEK initiative.

According to Susiwijono, the revisions will most likely include matters on immigration facilities and policies as well as issues involving foreign workers. Technically, the special economic zones plan also seeks to encourage foreign investments on business centers that the government will designate for boosting corporate activities.

Ahead of the upcoming election, the Indonesian government has been supporting the initiative to attract investors in the country's electric vehicles industry. It was recently revealed that the government has been seeking investments from Volvo and Renault as Indonesia aims to transition to battery-powered vehicles.

In line with this scheme, incumbent President Jokowi Widodo has pledged tax incentives to further entice investments for the country's booming EV sector. Volvo and Renault have reportedly been asked to consider establishing manufacturing plants in the country.

In Southeast Asia, Indonesia is regarded as the largest market for automobiles. If the Indonesian government secures a deal with two of the world's leading automakers, it is expected that there will be more foreign interest in the special economic zones being established to drive the economy upward.

One of the issues that analysts are expecting to be resolved through improved business activities under the special economic zones scheme is to increase exports of Indonesian goods. Over the last few years, the country has imported more than it exported.

Increased infrastructure momentum is one of the current government's focus. New projects are expected to boost exports and entice foreign investments in various industries. However, the Indonesian government's infrastructure initiative has been questioned by some analysts.

Some economic experts noted that for special economic zones to work according to plan, targets should be clarified and organization of processes should be prioritized. Private sectors should also be involved heavily in the initiative to build stronger business ties, analysts recommended.

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