After having been delayed for several weeks, the Indonesian government today unveiled the seventh stimulus package. The series of stimulus packages are aimed at boosting economic growth in Southeast Asia's largest nation amid slowing growth in China (the primary trading partner of Indonesia), low commodity prices (Indonesia's primary export products), and a looming US interest rate hike later this month (possibly triggering heavy capital outflows from Indonesia).
Indonesian Chief Economics Minister Darmin Nasution said that - as part of the seventh economic stimulus package - the government will waive income tax for workers in the nation's labor-intensive industries. Those who work in labor-intensive industries, such as footwear, textiles or tobacco, and earn less than IDR 50 million (approx. USD $3,700) per year are eligible for exemption from paying income tax. This policy will be maintained for at least two years.
Another new policy set in the seventh stimulus package is that the government will grant leasehold certificates (for free) to street vendors operating in 34 state-owned designated areas. This program, which will be launched in Banten (West Java) later this month, aims to increase vendors' capital. Currently, Indonesian vendors have difficulty obtaining loans as most vendors are working illegally and lack capital to secure a loan. Through this new policy, however, they will have access to government-backed micro-loans.
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 lasehold certificates for street vendors operating in 34 state-owned designated areas