Indonesia: A country with great investment opportunities II

Through Industrial revolutions the government hopes to improve its net export to GDP from one percent to ten percent by 2030 and increase the manufacturing sectors’ contribution to 25 % in 2030.
There are ten national priorities to achieving the goals of 4 IR.
1. Reform material flow to enhance domestic upstream production
2. Attract foreign manufacturers to incorporate in industrial and accelerate technology transfer
3. Redesign Industrial Zones to develop a single nationwide Industry Zoning roadmap.
4. Encourage sustainability to explore opportunities in sustainable Industries, such as renewable.
5. Empower some 3.7 million Small and Medium Enterprises ( SMEs) by embracing digitalization and technology . 62 % of the micro or small enterprises, which often have low productivity.
6. Building a nationwide digital infrastructure to advance the national network and build digital platforms such as 5 G technology and data centers.
7. Developing Human Capital for preparing Indonesian talent that is compatible under the Industry 4 IR era. The country was the world’s fourth largest working population.
8. Regulation and policy reforms to build move coherent policies.
9. Establish an innovative ecosystem to enhance research and development initiatives by public and private sector and higher education institutes. Indonesia currently spends 0.1 to 0.3 % of its GDP on Research and Development which it further wants to increase.
10. Incentivize investment in technology to provide an array of incentives, such as tax exemptions and subsidies for local business who are adopting new technology in their operations.
Compare to other ASEAN states, Indonesia, planning well its 4IR strategies. The Indonesian government has offered various tax incentives to investors. These tax incentives include exemption from income tax, value added tax, import duties, sales tax on luxury goods, and excise duties. Business stake holders in a SEZ are differentiated into two types of tax payers: baden usaha (business entities) and pelaku usaha (business persons). Both business entities for a 100% reduction provided their investment are conducted with a minimum investment value of 100 billion rupiah (US$ 7 million) for a period of ten years. After the expiration of afore mentioned CIT income tax payers are eligible for a 50% CIT reduction payable for the subsequent two years.

The Island of Batan has been a free trade zone since 2009, along with the neighboring Bantam and Karimun islands and its first SEZs were set up in 2017. Together the three islands are known as The BBK Free Trade Zone. Singapore is only 20 km away from there and some 70% of Bantam foreigners are Singaporeans, who use the island as an alternative manufacturing hub. Singaporean companies have contributed some 42% of the US$ 2.5 billion of foreign investment that Bantam has received between 2015 to 2020. The Island produces goods ranging from computer clips to precast concrete is home to multi-national companies, such as Caterpillar, Ciba vision, and Schneider Electric, Indonesia is also going to open two new SEZs on Bantam after President Joko Widodo recently approved the decision, which includes The Nongse Digital Park. The Digital Park will focus on Research and Development education, and creative industries along with its existing focus on technology and tourism. The Park originally opened in 2018 after bilateral discussions between Indonesia’s IT hub and digital bridge between the two countries. Currently the park is 155.43 hectare of land and is home of over one hundred technology companies mostly from Singapore. The Park aims to attract more international investors, Beyong Technology, Singapore based contingent currently active in the area. Its goal is to receive 16,000 billion rupiah equal to US$ 1.1 billion in investment and to create 16,500 new jobs to reach this target, the park hopes to become a hub for data centers, and industry. The Market Research firm Technavio projects will grow by US$ 10.5 billion between 2019 and 2023 in Southeast Asia. The Park will be at the forefront of Indonesia’s booming digital economy, which according to a report by Google Temasek, and Bain Company, will have a gross merchandise value (GMV) of US 146 billion by 2025, the largest in ASEAN. This growth will be primarily driven by e commerce which is expected to have a GMV of US$ 104 billion by the same year. Bantam Aerotechnic (BAT) is other new SEZ declared by President Joko Widodo alongside the Nongso Digital Park. Bantam Aerotehchnic plans to expand from maintenance, repair and overhaul (MRO) of passenger air craft to logistic and distribution, production and processing, and technology development. BATS hope to capture the US$ one billion that would airlines spend on MRO and US$ 100 billion that airlines in the Asia Pacific will spend by 2025. Other supporting industries currently being developed in the SEZ are in the form of logistics, such as warehousing of equipment and components. Further BAT aims to manufacture cabin items from head racks to galleys, airplane lavatories, airplane seats, carpet and hand rests. The 30-hectare facility is owned by Lion Air Group, the holding company that owns Indonesia’s largest private air line, Lion Air. In 2013, The airline made the largest ever single order of Airbus A 320, Planes at 234, valued at US$ 22.4 billion. Bantam Aerotechnic aims to receive 7.2 trillion rupiah equal to US$ 500 million investments and create close to 10,000 jobs with upgrade to SEZ status. Indonesia is the second fastest growing aviation industry in the world after China, and the country’s air passenger market is expected to become the fourth largest in the world by 2039.
Indonesia is an emerging economy and has enormous opportunities to invest and offering very attractive package and facilitation to potential investors. Business community should avail the opportunity and expand their business to international market by investing in Indonesia.