Agricultural Potency of Purbalingga Regency

Purbalingga Regency is one of the 35 regencies in the Central Java Province. Located in its west side, geographical coordinates of Purbalingga are 7.10 o – 7.29 o S and 101.11 o – 109.35 o E. Purbalingga is about 77,764 hectare wide or 2.39 % from the total of the width of Central Java Province. Purbalingga is divided by 18 sub districts (third level autonomous region), 224 villages and 15 Kelurahan (fourth level autonomous region). Purbalingga is surrounded by Pemalang Regency in North, Banjarnegara Regency in the east and Banyumas Regency in the west and south.

In Purbalingga, the utmost use of land is in agricultural activities. It is about 43.273 hectare or 56.65% from the total width. The agriculture area is divided into several types of area: 18,311 hectare for the rice field, dry field for about 20,317 hectare, 4,532 hectare of mixed plantation, single plantation for about 16.4 hectare and 95.3 hectare of fishery.

Purbalingga area lay from the lowlands in the south with 42 meter height above sea level to highland in the north with 3.100 meter height. These unique differences cause wide climate variation and, as a result, promote diverse possibilities to develop various agriculture commodities.

Food crop commodities

Southern Purbalingga is lowlands and it is good to develop the food crop commodities such as grains and crops which are supported by its fertile soil; its nice climate and its sufficient water to irrigate the field. Food crops are mostly planted in sub districts of Bukateja, Kemangkon, Kalimanah, Padamara, and half of Kutasari and Bojongsari. Even in the higher area like sub district of Karanganyar, Kertanegara and Karangmoncol, the food crops could also grow well.

Rice

Rice is staple foods of almost all Indonesian people, including those living in Purbalingga. Paddy field has the widest land area for about 33,357 hectare. It produces in average 2.33 quintal per hectare and the total rice grains productions are 207,916 ton per year. Rice is also produced from different kind of irrigation technique, such as those produced from dry field. It is estimated that as many as 3,426 ton per year is acquired from 759 hectare. This rice grain production exceeds the need of house hold and industry which resulted in its success to produce surplus for about 30,000 ton per year.

Corn

The corn harvest area is about 9,841 hectare. The corn production in average is 31.81 quintal per hectare. The corn production in average is 31.81 quintal per hectare and the total corn production is about 31,302 ton per year. Ever since that corn is not a popular staple food in Purbalingga, people rarely consume it, rather, they use corn as cattle food. Given the fact, the chance to process corn into maize flour, popcorn and corn porridge is wide opened. Moreover, as corn’s production has not sufficiently met the needs of the consumption of household and industry, there might be wide possibilities to develop the capacity of its production in Purbalingga.

Cassava

The biggest cassava area is in sub districts of Pengadegan, Kejobong and Rembang. The total area is about 9,098 hectare. It produces in average 278.87 quintal per hectare with the total cassava production is about 253,716 ton per year. Cassava is mostly processed into tapioca flour and nearly half of them are consumed as or turned into traditional food.

Peanut

The total area is around 2,363 hectare. It produces in average 12.78 quintal per hectare, which is relatively smaller than other crops. It appears that because most of the farmers treat the peanut not as the primary crop, rather as an optional one. Peanut is the main goods of home industry, preferably snack and it’s by products can be utilized as cattle foods. The local peanut production has not met the market needs in Purabalingga.

Sweet Potato

The total area is 234 hectare. It produces in average 55.33 quintal per hectare. The total sweet potato production is 1,329 ton per year. Sweet potato is usually consumed as traditional food.

Soya bean

The total area is around 551 hectare. It produces in average 13.52 quintal per hectare and yielded 13.52 ton per year. Soya bean is processed into one of traditional foods with simple technology (tofu and tempe) and also the main goods of ketchup production. The soya bean production is still very low and the local production has not met the consumers need. Even worse, the production has not met the consumers need. Even worse, the production of tempe and tofu largely relies on imported white soya bean as its main goods. Given these circumstances, the possibilities to invest in soya bean plantation, either the white soya bean or the black one, is still wide open.

Horticulture

The horticulture crops are developed mostly in northern highland Purbalingga. The vegetables and fruits are planted in sub districts of Karangreja and half of that Mrebet.

Potato

The total area is 445 hectare. It produces in average 183.71 quintal per hectare with total potato production around 8,175 ton per year. Potato is the most wanted commodity due to its constant price and its higher margin. In addition to meet the need of local consumption, the potato is also traded in other regions, especially in big cities like Jakarta and Semarang.

Cabbage

The total area is 348 hectare. It produces in average 183.47 quintal per hectare with 6,524 ton total cabbage production per year. People use the cabbages as the main ingredient for vegetable soup. Cabbage produce experienced surplus and is traded to other regions.

Carrot

The total area is 198 hectare. It produces in average 194.04 quintal per hectare with 3,842 ton total carrot production per year.

Beans

The total area is 496 hectare. It produces in average 36.59 quintal per hectare and its total beans production is 1,815 ton per year.

Chili

The total area is 170 hectare. It produces in average 60.35 quintal per hectare and its total chili production is 1,026 ton per year.

Leek

The total area is 176 hectare. It produces in average 47.73 quintal per hectare with 840 ton total leek production per year.

Fruits

Half of Purbalingga area is really good to plant fruits. Several kinds of fruits are grown in Purbalingga, such as: orange, duku, durian, banana, and Salacca. The fruits are planted in the dry area surround sub districts of Kaligondang, Pengadegan, Kejobong and Bukateja.

Siem Orange

Siem orange is planted mostly in Bukateja. The siem orange total production is 127,203 quintal per year with 196,543 total productive crops.

Banana

Purbalingga has various types of banana. The banana total production is 89,884 quintal per year with 537,568 total productive crops.

Durian

The durian is grown in sub districts of Kemangkon, Kejobong and Pengadegan. With its specific taste, Purbalingga durian has its own merit if we compare with other regions’ durian. The durian total production is 52,226 quintal per year with 28,868 total productive crops.

Salacca

With total production crops, Salacca total production is 45,609 quintal per year. Purbalingga Salacca has similar taste with other regions’ produce.

Rambutan

As one of the exotic fruits which grow in tropical zone, rambutan is also well grown in Purbalingga. With 80,630 ton total production crops, rambutan total produce is 41,005 quintal per year.

Duku

Duku is one of Purbalingga prime fruits. Duku grows in specific region and not every region has duku as their specific fruit. With its unique taste, duku has been sold to big cities in Indonesia. The duku total produce is 33,604 quintal per year with 49,793 total productive crops.
Also, Purbalingga has small amount of produce of sour soup, mangosteen, pineapple, tan, mango, avocado and guava.

Plantation

Until recently, the plantation commodity in Purbalingga has not been well cultivated. The nature potency such as its fertile soil and its good climate has not been maximized. However, many peasants and the government have pioneered several kinds of plantation crops development, such as pepper, nilam, sugarcane, coconut, and Gambier jasmine.

Pepper

Purbalingga is the biggest exporter of pepper in Central Java. A percentage of 46% of pepper in Central Java market is produced in Purbalingga. Pepper is mostly cultivated in Pengadegan and Kejobong with 212.40 hectare total area and 307 ton total dry seed produce per year. The pepper plantation’s development is still open either in the on farm stage by increasing population and rising productivity or by means of processed goods. The pepper market chance in Indonesia or abroad is still wide opened.

Nilam

Nilam Commodity is needed by the market. Nilam is the main goods of perfume, soap and medicines. The total area is 607.10 hectare. The total production of dry nilam leaves are 5,039 ton per year. The export chance to international market is still open because the product is favoured mostly in Japan, India and Europe.

Dalam Coconut

Coconut tree is widely grown in almost every area of Purbalingga. People plant the coconut in every agricultural farm, plantation and village. Of 12,032 hectare of the total area, this sector can produce 12,366 ton copra per year. This coconut is the main goods of coconut oil production.

Deres Coconut

The half of the coconut produce in Pubalingga is aimed at producing the palm sugar. Of 5,168 hectare of the total area, Deres coconut produces 52,879 to of palm sugar per year. The development of deres coconut’s plantation is still open either in increasing the number of coconut trees or the implementation of modern technology in palm sugar processing in order to increase palm sugar productivity. Palm sugar industry also supports ketchup industry as the secondary industry of palm sugar commodity.

Sugarcane

As the main goods of sugar, the number of sugarcane crop in Indonesia is very low. Purbalingga, the sugarcane area is just 56 hectare with 215 to total production per year. The opportunity to invest more in Purbalingga is still open mostly for the dry sugarcane plantation. The sugarcane areas include sub districts of Kaligondang, Kemangkon, Mrebet and half of Bojongsari.

Gambier Jasmine

Gambier jasmine is planted in Bukateja with total area around 425.23 hectare and produces as many as 3.269 ton wet flower each year. This commodity promotes high economic value commodity but it needs specific soil and climate. For that reason, the Gambier jasmine can not well developed in other areas.

Source: Vision of Purbalingga, Drs. Triyono Budi Sasongko, M.Si.

Guide to Agricultural Investment in Indonesia (5)

Guide to Agricultural Investment and Trade Opportunities in Indonesia (5)

 

Immigration

 

Visa and Immigration Requirements

Tourists and business visitors from Argentina, Australia, Austria, Belgium, Brazil, Brunei, Canada, Chili, Chinese Taipei, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Maldives, Malta, Morocco, Mexico, Monaco, Netherlands, New Zealand, Norway, The Philippines, Saudi Arabia, Singapore, South Korea, Spain, Sweden, Switzerland, Hong Kong, / China, Thailand, Turkey, United Arab Emirate, United Kingdom, United State of America, Venezuela and Yugoslavia do not require visa for a maximum stay of 2 (two) months. In addition, tourists and business visitors from Hong Kong Special Administrative Region (SAR) and the Myanmar do not require visa for a maximum stay only of 2 (two) weeks. However, these visas are not extendable. The granting of free visa to business visitors is limited for the purpose of business investigations or discussions with their business relations. They are not permitted to conclude any business transaction, engage in local employment, and perform any professional or technical service. Visa is still required for visitors from countries which are not mentioned above.

Multiple-Journey Business Visas

 

Multiple-Journey Business Visa travel visa gives the bearer the right to make several entries to Indonesia within a period of 12 (twelve) months and each stay up 2 (two) months.

For business or tourist travelers of nationalities that have obtained the two months free visa on arrival, multiple-journey business visas are not necessary for stays within those two months.

Limited Stay Visas or Temporary Residents Visas

 

Limited stay visas are valid for three months to one year and are issued exclusively to experts for the national development and to expatriates who are involved in training or other educational or scientific programs in line with the prevailing government regulations. Direct dependents can also qualify for this type of visa.

Re-entry Permit

Non-citizens with residential status in Indonesia must have valid re-entry permits to re-enter Indonesia.

Environmental Protection

 

In 1990, the government established the environmental Impact Management Agency (BAPEDAL) and then, since 2002 this Agency merges into the Ministry of Environment which is responsible for the development and implementation of national policies and programs for environmental management particularly as they relate to urban and industrial pollution and hazardous waste management.

The ministry of Environment oversees a decentralized enforcement system (conducting environmental assessment) through the Regional Environment Management Agency (BAPEDALDA) and regional laboratories to ensure efficient monitoring of the implementation of environmental policies.

Business Entrance

 

Indonesia has been stipulated the new law No.: 25/2007 concerning Investment (in Indonesia), to meet the above Investment law Indonesia Government is preparing the derivates regulations.

For the transition, few fields of business activities are regulated by President Decree No. 96 of 2000 as amended by No. 118 of 2000. There are 11 (eleven) business activities closed for any investment (domestic as well as foreign / PMA) such as cultivation and processing marijuana, collection / utilization of sponges, Industries of harmful chemicals and chemical weapon, which are listed in the attachment-I of the mentioned decrees. There are 8 (eight) business activities and closed for PMA companies such as germ plasma cultivation, concessions for natural forest, which are listed in the attachment-II. In addition, there are 9 (nine) business activities opened on the condition of joint venture between foreign and domestic capital, such as developing and operating of harbor, electricity production, transmission and distribution, as listed in the attachment-III. List of business activities which are opened for investment if fulfilled certain condition of fish in fresh water, industries of pulp made of wood and ethyl alcohol.

The Indonesian Regulatory Environment

 

The Indonesian Investment Process

 

The Capital Investment Board (BKPM) has the responsibility to administer and grant investment application. BKPM issues licenses for both domestic (PMDN) and foreign investment (PMA).

Service and / or licensing convenience may be given and renewed in advance simultaneously and may be further renewed upon request of the investors in form of:

a. Hak Guna Usaha (leasehold) may be given for 95 (ninety-five) years and simultaneously renewed in advance for 60 (sixty) years, and it may be further for 35 (thirty-five) years.

b. Hak Guna Bangunan (building rights) may be given for 80 (eighty) years, and simultaneously renewed in advance for 50 (fifty) years, and it may be further renewed for 30 (thirty) years and

c. Hak Pakai (right of use) may be given for 70 (seventy) years, and simultaneously renewed in advance for 45 (forty-five) years, and it may be further renewed for 25 (twenty-five) years.

The government shall provide the same treatment to any investors originating from any countries making investment in Indonesia pursuant to the rules of law. Treatment set forth shall not apply to investor of certain countries that have received privilege by virtue of an agreement with Indonesia.

On-stop integrated service is meant to assist investor in obtaining service convenience, fiscal facility, and information about investment. One-stop integrated service shall be provided by authorized institution or agency. In investment sector that have been delegated or assigned by institution or agency possess the authority to issue licensing or non-licensing in a province or regency/city. Provisions on the method and implementation of such one-stop integrated service set forth shall be governed with presidential regulation.

The approval process today for foreign investors is easier than before 1997.

The professional adviser is highly recommended for any new company wishing to establish.

There are regional BKPM offices, which are located in provinces, known as BKPM also have responsibility for issuing licenses and approvals.

The investment Law (now under processed) eliminates many impediments and red neck investment procedures.

 

SOURCE: 

Guide to Agricultural Investment and Trade Opportunities in Indonesia, Ministry of Agriculture, The Republic of Indonesia

Guide to Agricultural Investment in Indonesia (3)

 

Agricultural Investment and Trade Opportunities in Indonesia (3)

 

Indonesia's land legislations do not recognize the concept of freehold land rights. Instead the various right attached to the land are subdivided into separates titles.

The Basic Agrarian Law (Law no. 5 of 1960) recognizes type of rights on land of non-state-forest area, whereas state forest-area, the Law no 5 0f 1967 on forestry is applied. To foreign as well as domestic investor, the following three main rights are significant; the Land Cultivation Rights (Hak Guna Usaha, abbreviated as HSU), the Right of Building on Land (Hak Guna Bangunan, abbreviated as HGB) and the Right of Use on Land (Hak Pakai, abbreviated as HP). These rights authorize the use of land in some ways, and their differences are mainly on the duration of validity, the nature of utilization, the opportunity to mortgage (to use as asset or collateral) and proof of title:

1. The Land Cultivation Right (HGU) is the right to use a state Owned Land for the purposes of agriculture namely plantation, or cattle rising. By law the title is granted for maximum period of 35 years, but can be extended to 25 years is the land is properly used and managed. This title of right is given to Indonesian individual(s) or legal entities domiciled in Indonesia including PMA companies. It can be used as collateral or transferred to other party with the government approval.
2. The Right Building of the Land (HGU) is the right to construct and own building on a peace of land that one has purchased. The title is granted for a maximum period of 30 years and can be extended for maximum period for 20 years for Indonesian individual(s) and / or legal entities domiciled in Indonesia including PMA companies. It can be used as collateral or transferred to other party. This is also applicable and generally granted to tenants in Industrial estates.
3. Right of Use on Land (HGB) is the right to use land for a specific purpose and granted for a period of 25 years and can be extended for period of 20 years or as long as the land is used for certain (normal) utilization. Now, this right can also be used as a mortgage. In addition, it can also be transferred to other party through a government approval.

Dwelling House or a residence that can be owned by a foreign person shall be :
1. A separate house constructed on a piece of land with the right of utilization on state land or controlled on the basis of an agreement with a land holder: or,
2. An apartment constructed on a piece of land with the right of utilization on state land.

Foreign investors who obtained mining contract from the minister of Mines and Energy or the respective Governor / the District Head or forest exploitation rights and or plantation right from the Ministry of Agriculture or the Respective Governor / District Head could automatically use the land within their business license. In case investors want to use the land for different purposes, special applications should be submitted to the Ministry or the respective Governor / District Head concerned. These rights have no collateral value to the owner.

To be continued.

Source: Guide to Agricultural Investment and Trade Opportunities in Indonesia, Ministry of Agriculture, the Republic of Indonesia

Guide to Agricultural Investment in Indonesia (2)

Government Incentives

 

Import Duties

All investment projects of PMA as well as PMDN projects which are approved by the investment coordinating Board or by the Office of Investment in the respective districts, including existing PMA and PMDN companies expanding their projects to produce similar product(s) in excess of 30% of installed capacities or diversifying their products, will be granted the following facilities:

1. Relief from import duty so that the final tariffs become 5%. In the case of tariffs of import duty which are mentioned in the Indonesian Customs Tariff Book (BTBMI) being 5% or lower, the effective tariffs shall be those in BTBMI:

a. On the importation of capital goods namely machinery, equipments, spare parts and auxiliary equipments for and import period of 2 (two) years, started from the date of stipulation of the decisions on import duty relief.

b. On the importation of goods and materials or raw materials regardless of their types and composition, which are used as materials or components to produce finished goods for the purpose of 2 (two) years full production (accumulated production time).

2. Exemption from the transfer of ownership fee for ship registration deed / certificate made for the first time in Indonesia.

Tax Facilities

1. The government has introduced a tax bill No’s 16, 17, 18, 19 and 20 of 2000 and applied since January 2001. Based on this tax law, the domestic and foreign investors will be granted tax allowances in certain sector and / or area as follows:

a. An investment tax allowance in the form of taxable income reduction as much as 30% of the realized investment spread in 6 (six) years.

b. Accelerated depreciation and amortization.

c. A loss carried forward facility for period of no more than 10(ten) years.

d. A 10% income tax on dividends, and possibly being lower if stipulated in the provisions of an existing particular tax treaty.

2. The government has also introduced provisions No’s 146 of 2000 and 12 of 2000 of 2001 on the importation and or delivery of selected taxable goods, and or the provision of selected taxable services as well as the importation and or delivery of selected strategic goods which are exempted from for certain industries or sectors and or location of projects which are considered a national priority in terms of exports and the development of remote areas, the government will provide tax incentives.

Export Manufacturing

There are many incentives provided for exporting manufacture products. Some of these incentives are as follows:

1. Restitution (drawback) of import on the importation of goods and materials needed to manufacture the exported finishes products.

2. Exemption from value added tax and sales tax on luxury goods and materials purchased domestically, to be used in the manufacturing of the exported products.

3. The company can import raw materials required regardless of the availability of comparable domestic products.

Bonded Zones

The industries companies which are located in the bonded areas are provided with many intensives as follows:

1. Exemption from import duty, excise, income tax of Article 22, value added tax on luxury goods on the importation of capital goods and equipment including raw materials for the production process.

2. Allow to divert their products amounted to 50% of their export (in term of value) for the final products, and 100% of their exports (in term of value) for other than final products to the Indonesian customs area, through normal import procedure including payment of customs duties.

3. Allowed to sell scrap or waste to Indonesian custom area as long as it contains at the highest tolerance of 5% of the amount of the material used in the production process.

Allowed to lend their own machineries and equipments to their subcontractors located outside bonded zones for no longer than 2 (two) years in order to further process their own products.

Exemption of value added tax and sales tax on luxury goods on the delivery of products for further processing from bonded zones to their subcontractors outside the bonded zones or the other way around as well as among companies in these areas.

To be continued.

Source: Guide to Agricultural Investment and Trade Opportunities in Indonesia,Ministry of Agriculture, the Republic of Indonesia

Guide to Agricultural Investment in Indonesia (1)

Agribusiness Investment Reform

The investment enviroment provided by Indonesian government is primarily intended to create a more conducive environment for agribusiness development and an incentive for farmer and private enterprises to carry out agricultural activities. Hence, investment by both foreign and domestic investors is aimed at stimulating and encouraging investment in production activities with the direct involvement of farmers and other parties in private sectors.

The primary target of agribusiness investment is increasing production in food crops, horticulture, estate plantation and livestock the investment also plans to create production facilities for inputs like fertilizers and agricultural machinery. It is expected that these investments in processing, distribution and marketing activities, as well as the financial system will accelerate the development of agribusiness in rural area.

During the 2005-2006 periods, total domestic investment in agribusiness was Rp 40,713.1 billion. With largest contribution invested in food industry and estate crop. Due the economic crisis, this number declined to Rp 766 billion in 1998. The domestic agribusiness investment was about Rp 763.3 billion due to the more actable economic and political condition in Indonesia. And in 2006, the number domestic investment was Rp 28,301.7 billion.

Foreign investment trend were decrees, during period 2005-2006 total foreign investment in agribusiness was US$ 3,009.3 billion and average US$ 1,504.7 billion. In 2006, the number foreign investment was US$ 1,904.9 billion. However during 2006 the number of foreign investment was growing as well as the domestic investment.

Investment policies statement

Recognizing, that the importance of private sector investment to achieve sustainable economic growth, employment creation, development of strategic national resources, transfer and implementation of competitive technology and technical skills, export growth and improved balance of payments.

Appreciating, that an appropriate legal framework is prerequisite to promoting a stable, predictable and attractive business environment in order to encourage and support private economic activity Indonesian and foreign investors.

Acknowledging, that an appropriate legal framework for investment must provide certain key principles, among which are: equal treatment of investor in similar circumstances irrespective of nationality; protection against expropriation, confiscation or requisition of investments and unilateral alteration or termination of contracts, freedom to repatriate foreign investment capital and net proceeds there on; and access to impartial, quick and effective mechanisms for the resolution of commercial and other investment disputes.

Cognizant, that these principles have increasingly been adopted as standard international practice and have been incorporated into national legislation in many countries, both regionally and globally, and have been recognized in various international documents, including the GATT/WTO agreements, the APEC Non Binding Investment Principles, and numerous bilateral investment agreements.

Undertake and resolves to reform the investment policies, legislation and regulations of the Republic so as to create and enabling environment for private investment consistent with the above stated principles, to be characterized by active promotion and facilitation of investment, transparent criteria for the admission and establishment of investments, transparency of government procedures and administration, screening and licensing requirements based on a short “negative list” of restricted investment.

The government has therefore established an “Investment Policy Reform Initiative” having as its objective the encouragement and facilitation of private sector investment through reform and implementation of transparent, predictable, market oriented policies applied equally to both foreign and domestic investors. In this the government has recently adopted major policies changes, including liberalizing the rules for foreign investment.

The government is committed to the rapid elimination of the remaining restriction on foreign and local private investment. This statement sets forth newly adopted and current policies of the Government for promoting and facilitating private sector investment in Indonesia. The Government is fully committed to these policies and will take the necessary steps to ensure their effective implementation. This statement will be supplemented by detailed investment guidelines to be issued in the near future. To encourage and facilitate private investment, the government has adopted the following policies.

Freedom to Invest

Investors shall be permitted to invest in any sector of the economy except in small number of activities, which are listed on “negative list”. There shall be no restriction on the size of the investment, the source of funds or whether the product s is destined for export or for the domestic market. Exciting foreign investors may invest in activities other than those initially authorized, except for activities started on “negative list”.

Company Formation

Industrial licenses are still needed based on the principles of fairness, simple, quick and transparent mechanism and procedure. Procedures for company formation are to be administered so as to permit prompt establishment of business enterprises.

Taxes and Duties

The government is committed to enhance the country’s investment climate and international competitiveness by further reducing simplifying taxes and duties through ongoing tax and trade policy reform programs. The current Indonesia tax law provides tax incentive to investor who invests in certain sectors and or certain areas as follows:
-Investment allowances,
-Accelerated depreciation and amortization,
-Expanded loss compensation but not more than 10 years,
-10% tax rate for dividend paid to foreign tax payer, except to prevail tax convention maintaining lower tax rate.

Indonesia always tries to maintain equal treatment in tax law not only for tax cases that have similarities. By giving tax incentive to investors, Indonesia must assure that this incentive granted still reflect the principle of equal treatment and the application of that principle did not depart from the objective of tax incentive.

Availability of to Foreign Exchange

The government will continue to ensure, according to pre-set criteria and procedures that foreign exchange for import transactions and dividend payments is freely available and the Governments is committed to ensuring the ease of repatriation of capital and payments for business services.

Access to Local Funding

The government is considering introducing a simple system that will allow foreign investments access to local funding based on simple established criteria.

Labor Practice

Within the framework of the labor laws of Indonesia, the Government recognizes that enterprises may require foreign expertise. Accordingly, it will continue to make residence permits readily available according to prevailing regulation for key personnel required for employment in such enterprises.

General Infrastructure

The Government recognizes the importance of infrastructure to support investment and is committed to make available adequate infrastructure such as transport, electricity, water, and communications through partnership mechanisms that attract private capital. Adequate legal protection including guarantees for the integrity of contracts will be provided.

Availability of Land

The government is committed to ensure that land for industrial and commercial use is ready available to investors. The Government will receive and simplify all existing land licensing and environmental approval procedures to ensure transparency.
The Government is committed to develop new serviced industrial sites and has provided the necessary framework to enable private investors to develop industrial sites including through arrangements for subleasing to other investors.

Encouragement for small and medium Enterprises

The country’s small and medium scale enterprises hold great potential for rapid economic growth and employment creation. The Government is therefore dedicated to continuing with various programs assists these enterprises, including simplifying the regulatory and policy environment, removing obstacles to securing access to raw materials, removing tax related impediments and improving access to credit.

The Government will promote mutually advantageous, commercially beneficial subcontracting/partnership arrangements between large-scale foreign and local firms and small- and medium-scale business.

Investment Promotion

To further enhance the capacity of the BKPM (Investment Coordinating Board) and to create an integrated investment promotion regime, the Government is actively reviewing proposals for the formation of an independent, public private partnership to promote and facilitate all private investment in Indonesia.

Investment Services

The Government is committed that investment services for foreign and domestic investment in the era of the regional autonomy is more preferable that the current condition. Therefore, a “one stop service” system will be introduced to be implemented in the region.

Investment Protection

The government recognizes that security of assets of investor is of paramount importance. It therefore, assures investors that it will avoid using any measures that will adversely affect their property rights. In the case of foreign investors, the Government has negotiated and concluded several bilateral investment treaties, which provide direct protection to investors for the security of their assets as well as assurances for the repatriation of proceeds from their investments. The Government will actively work to pursue to conclude additional bilateral investment treaties with other countries. Indonesia has also joined the Multilateral Investment Guarantee Agency (MIGA).

Double Taxation Relief

To improve economic and trade relationship with other countries, Indonesia would like to have certain law provisions that regulate the right of tax imposed law imposed from each country. The purposes of those provisions are achievement of rule of law, avoiding double taxation, and prevention of tax evasion. Government is entitled to make an agreement with other countries to avoid double taxation and to prevent tax evasion.

The frame work and the matter of this agreement are based on international convention and other rule of laws and also the tax regulation of each country.

Arbitration

The Government recognized that foreign investors must have an appropriate forum to resolve disputes that cannot be settled amicably. While such disputes would normally lie within the jurisdiction of a competent court, parties may agree in certain cases to pursue extra-judicial adjudication and to choose an appropriate forum, including international conciliation or arbitration. To that end, Indonesia has become a member of the International Center for settlement of investment Disputes (ICSID) at Washington DC.


To be continued.

Source: Guide to Agricultural Investment and Trade Opportunities in Indonesia,
Ministry of Agriculture, the Republic of Indonesia

Economic Outlook and Improving Investment Climate

The Government of the Republic of Indonesia held group luncheon presentation at Imperial Hotel Tokyo on May 8, 2007. The opening remarks were presented by H.E. Dr. Jusuf Anwar, Ambassador of the Republic of Indonesia and Mr. Yuji Shirakawa, Chairman Nikko Citigroup Limited.

Dr. Anggito Abimanyu, Head of Fiscal Policy Office, Ministry of Finance presented “Economic outlook and improving Investment Climate”. He explained “Recently Approved Investment Law – Supportive Climate for Investment” to fifty Japanese Investors.

A. Equal legal status
1. Equal status and treatment to domestic and foreign investors

B. Investors’ protection
2. Protection against nationalization and any exploration, as must be based on law and compensated at market prices
3. Guaranteeing the right to repatriate earnings in foreign currency
4. Omission of the forced divestiture and limited duration of foreign investment under 1967 Foreign Investment Law

C. Dispute resolution
5. Binding international arbitration in the event of dispute between the government and foreign investors

D. Negative list
6. All business activities open to investment unless explicitly close/restricted
7. A transparent investment negative list based on standard industrial classifications to be issues as a single Presidential Regulation

E. Property rights
8. Stronger property rights (e.g. land use rights for investor of up to 95 years)

F. Immigration procedures
9. Allowing expatriate to be granted two years residence permits with multiple entry visas
10. The Residence permits to be turned into a permanent residence permit for living in Indonesia continuously for more than two years

G. Tax incentives
11. Special tax incentives for certain types of investment under certain conditions. For e.g. : tax holidays for pioneer industries, income tax reductions, exemption of import duty and VAT for capital goods and raw materials, accelerated depreciation and reduced property tax.