The Indonesian government is offering significant fiscal incentives and easing licensing processes for investors in Special Economic Zones (KEK). Investors can enjoy tax exemptions for up to 20 years and 100% foreign ownership, alongside various non-fiscal benefits. Rizal Edwin, Secretary General of the National Council for KEK, highlighted that the development of KEK aims to decentralize economic growth, which has predominantly been concentrated in Java and Sumatra, and to enhance industrial, export, and import activities with high economic value. President Joko Widodo has approved the management of the cocoa and coconut sectors under the Palm Oil Plantation Fund Management Agency (BPDPKS), creating two new deputy positions. This move aims to leverage BPDPKS’s substantial funds for the immediate benefit of these sectors. From 2015 to 2023, Indonesia’s cocoa production declined by 8.3% annually, leading to increased imports. This drop in raw material availability has caused several cocoa processing companies to cease operations. Despite Indonesia being the fourth largest producer and exporter of processed cocoa products in 2023, the downstream coconut sector remains underutilized, with only 55% of processing capacity being used.
The government offers various fiscal incentives, including tax holidays, tax allowances, VAT and luxury goods tax exemptions, import duty suspensions, and local tax exemptions. Investors with a minimum investment of IDR 100 billion receive a 10-year tax exemption, those investing IDR 500 billion get a 15-year exemption, and investments of IDR 1 trillion are exempt for 20 years. Non-fiscal benefits include 80-year land-use rights, one-stop services, exemption from the negative list, environmental approvals by the business entity, no export obligations, and 100% foreign ownership. These incentives aim to attract foreign investment, foster regional economic development, and create jobs, addressing regional disparities. Bambang Wijanarko, Acting Head of the Investment Bureau, stated that the KEK policy is an improvement on previous free trade area and integrated economic area policies, which had limitations due to top-down implementation and inadequate incentive application. Since the enactment of the Job Creation Law and Government Regulation No. 40 of 2021, there has been a rise in applications for establishing KEKs, reflecting increased investor interest.
