Earlier this week the government of Indonesia released its 13th economic policy package. This 13th edition focuses on the reduction of bureaucracy (red tape) in a bid to boost the construction of low-cost housing for the poorer segments of Indonesian society. Currently, property developers are required to obtain 33 permits before they can start to build affordable housing for the low-income people of Indonesia. This results in a costly and time-consuming process.
By curtailing unnecessary bureaucracy, costs can be reduced by up to 70 percent for those developers that want to construct low-cost housing. Indonesia's Chief Economics Minister Darmin Nasution said the number of necessary permits will be cut from 33 to 11. Besides an expected huge drop in costs it will also require much less time to arrange all permits. Currently, it can take up to 981 days before a property firm manages to obtain all permits. Nasution now expects this figure to drop to 44 working days.
Some "unnecessary" permits that have been scrapped include the location permit (which took up to 60 days to be completed), the site plan drawing confirmation, the elevation recommendation, the flood anticipation system, the environmental impact assessments, and traffic analyses. Several other permits will be bundled into one package to make the application process more efficient.
By making it easier, faster and less expensive to invest in the construction of low-cost housing in Indonesia, the government's "1 million houses program" (a five-year program) should get a real boost. This government-sponsored program is one of the strategies to alleviate the nation's housing backlog from 11.4 million houses at the start of 2016 to (a targeted) 6.9 million by 2019. Considering that it will be less expensive for developers to build low-cost housing projects, end-consumers should also be able to purchase the house for a lower price. According to Nasution about 11.8 million Indonesian families currently still do not own a house and are likely to remain tenants for the rest of their lives unless the government lends a helping hand.
The 1 million houses program requires investment up to IDR 67.8 trillion (approx. USD $5 billion). It is financed through the state budget (IDR 8.1 trillion), the BPJS employee social security program (IDR 48.5 trillion), the Housing Savings Advisory Board for Civil Servants known in Indonesia as Bapertarum-PNS (IDR 3.1 trillion), state insurance firm Taspen (IDR 2 trillion), state house developer Perum Perumnas (IDR 1 trillion), and the housing loan liquidity facility (IDR 5.1 trillion).
Tough red tape managed to curtail the success of the 1 million houses program. So far this year only 400,000 low-cost houses have been built. The government will first focus on providing houses for civil servants. According to data from the Housing Savings Advisory Board for Civil Servants (Bapertarum-PNS) some 960,000 Indonesian civil servants do not own a house.
Minister Nasution said a presidential regulation will be issued within a 10-day period. This regulation will form the legal basis for the 13th economic policy package.
Since September 2015 the Indonesian government has been releasing a series of economic policy packages that collectively aim at boosting Indonesia's economic growth. These packages include tax incentives, deregulation and lower energy tariffs for specific labor-intensive sectors.
Meanwhile, Indonesian President Joko Widodo urged that the nation's National Land Agency (BPN) will speed up the certification of land in order to prevent agrarian conflicts. Widodo said he targets to see 5 million new land certificates to be issued each year. One of the key problems related to property and infrastructure development in Indonesia, especially in the rural areas, is that land ownership is not orderly organized and registered. Therefore, families who have been living for generations on a specific piece of land often have no documentation that shows ownership or the size of the land.
Economic Stimulus Packages of the Indonesian Government:
|• Boost industrial competitiveness through deregulation
• Curtail red tape
• Enhance law enforcement & business certainty
|• Interest rate tax cuts for exporters
• Speed up investment licensing for investment in industrial estates
• Relaxation import taxes on capital goods in industrial estates & aviation
|• Cut energy tariffs for labor-intensive industries
|• Fixed formula to determine increases in labor wages
• Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses
|• Tax incentive for asset revaluation
• Scrap double taxation on real estate investment trusts
• Deregulation in Islamic banking
|• Tax incentives for investment in special economic zones
|• Waive income tax for workers in the nation's labor-intensive industries
• Free leasehold certificates for street vendors operating in 34 state-owned designated areas
|• Scrap income tax for 21 categories of airplane spare parts
• Incentives for the development of oil refineries by the private sector
• One-map policy to harmonize the utilization of land
|• Single billing system for port services conducted by SOEs
• Integrate National Single Window system with 'inaportnet' system
• Mandatory use of Indonesian rupiah for payments related to transportation activities
• Remove price difference between private commercial and state postal services
|• Removing foreign ownership cap on 35 businesses
• Protecting small & medium enterprises as well as cooperatives
|• Lower tax rate on property acquired by local real estate investment trusts
• Harmonization of customs checks at ports (to curtail dwell time)
• Government subsidizes loans for export-oriented small & medium enterprises
• Roadmap for the pharmaceutical industry
|• Enhancing the ease of doing business in Indonesia by cutting procedures, permits and costs
|• Deregulation for residential property projects for low-income families