03 May 2016
ELEVENTH INDONESIAN ECONOMIC POLICY PACKAGE: IMPROVING NATIONAL COMPETITIVENESS IN THE GLOBAL ECONOMIC BATTLE

The Indonesian Government unveiled, on Tuesday, 29 March 2016, its 11th economic stimulus package (“Package”). The Package is the latest of the series of economic stimulus packages which have been issued since September 2015 with the aim of boosting the country’s economic growth and improving the investment climate.

The following are the Package’s five points:

1. Export-Oriented Micro Credit (Kredit Usaha Rakyat Berorientasi Ekspor or “KURBE”)
   

   The KURBE comprises credit facilities provided for export oriented Indonesian Small, Medium and Micro Enterprises (Usaha Mikro, Kecil, dan Menengah - “UMKM”) with the aim of improving the quality and competitiveness of their export products.

   The credit facilities are provided in the form of complete and integrated export financing facilities consisting of credit facilities for working capital (Kredit Modal Kerja Export – “KMKE” with a maximum tenor of 3 years) and credit facilities for investment (Kredit Investasi Ekspor – “KIE” with a maximum tenor of 5years), which will be administered by the Indonesian Export Financing Institution / Exim Bank. The maximum ceiling is 5 Billion Rupiah for Micro KURBE, 25 billion Rupiah (15 billion Rupiah for KMKE) for Small KURBE, and 50 billion Rupiah (25 billion Rupiah for KMKE) for Medium KURBE.

2. Income Tax (“PPh Final”) and Land and Building Title Acquisition Duty (Bea Perolehan Hak atas Tanah dan Bangunan or “BPHTB”) Facilities for the issuance of a Real Estate Investment Trust (“REIT”)

   The real estate business activities have been declining since 2014. In order to develop property businesses, the Indonesian Government plans to entice investors to issue REITs in the domestic capital market by reducing (i) the PPh Final rate on the sales of property to REIT issuing companies up to 0.5% from the 5% normal rate; and (ii) the BPHTB rate on the land and buildings constituting the REIT’s assets from maximum 5% to 1%. These economic stimulus packages will be regulated in several new regulations which include regional regulations.

   The issuance of REITs at a relatively low cost will make the long-term investment financing more efficient. This will in turn accelerate the infrastructure and housing development program planned under Indonesia’s National Medium Term Program for 2015-2018.

3. Indonesia Single Risk Management (“ISRM”)
   

   The government obliges all ministries/institutions (M/I) to develop facilities for the submission of licensing applications by way of a single submission through the Indonesia National Single Window (“INSW”).

   The INSW must apply the ISRM, which contains the business actor’s single identity and unified export/import activities information as the risks base profile and single treatment basis for the licensing process.

   The single risk management will be applied in three stages starting in August 2016 with the aim of reducing the dwelling time to less than 3 days by the end of 2017.

4. Development of Pharmaceutical Industry and Medical Devices

There are currently 206 pharmaceutical industries in the national medicine market, but 95% of the medical raw material is still imported. In addition, 90% of the health equipment/medical devices are also still imported. The condition needs to be addressed and changed for the sake of the smooth running of the National Health Security (Jaminan Kesehatan Nasional) policies.

The government plans to set up a road map and action plan which include developing research in the pharmaceutical and medical devices sector and preparing policies which would boost investment in this sector. Among the policies are fiscal policies involving import duty exemption or reduction, tax holiday and tax allowances. (by: Sevril Renishanti)