In January 2021, Indonesia’s government drafted a new investment target list, aiming to boost investments in certain industries.
The existing list, released in 2016, categorizes industries into three levels. Those that are open to investment (priority list), those that are closed to investment and lastly those who are open, but with regulations. Under the new list, Indonesia have added one additional type of investment level, which requires a partnership with an Indonesian SME. Further, the new list loses the investment requirement as more industries are put into the prioritized category. Therefore, Indonesia is bumping up the incentives for foreign investments to Indonesia, as there is less restrictions and required conditions.
For a business field to be defined as a ‘prioritized’, it must meet the following criteria:
Investments into business sectors that are periodized are eligible for both fiscal and non-fiscal incentives. Fiscal incentives include (amongst others) tax holidays, allowances and import duty exemptions, while non-fiscal incentives include (amongst others) ease of attaining business licenses and work permits. As a result of the lucrative incentives, more high-tech and innovative investments to Indonesia could improve the competitiveness of Indonesia’s position on the global market. Further, as the list prioritize labour-intensive investments, there is a great opportunity for foreign investors looking for cheaper labour costs within the manufacturing sector.
In conclusion, Indonesia’s new list aims to attract more foreign investments to the country. With bigger foreign capital flow into Indonesia, the employment rate and economic performance will be improved. In addition, high-tech and innovation investment might scale up Indonesia’s production output across different industries in the longer perspective. For foreign investors, the updated investment list provides them with substantial opportunities under a more friendly and stable investment environment. As a result, this could be a win-win outcome for both Indonesia and foreign businesses.