Investing in Indonesia: BKPM’s New One-Stop Service and a Tax Cut
The Indonesia Investment Coordinating Board (BKPM) conducted a trial of its new one-stop integrated service on Thursday (15/01). This soft launch was attended by various Indonesian ministers. The introduction of the one-stop service aims to attract more (foreign) investment as it speeds up licensing procedures. Currently, Indonesia is characterized by a high degree of bureaucracy resulting in a lengthy licensing process as investors need to obtain permits from various ministries as well as local government institutions.
Lack of coordination between the various government institutions has been an obstacle to investment in Southeast Asia’s largest economy.
The new one-stop service at the BKPM is supported by 19 ministries (including agencies) and 66 liaison officers who have been assigned to handle permit applications (or consultation) for investors.
Franky Sibarani, BKPM Chairman, said that the BKPM processes licenses for power generation, manufacturing, tourist and agriculture sectors in the trial run. The official kick-off of the one-stop service is scheduled for 26 January 2015.
Tax on Land and Buildings for Oil & Gas Exploration
Today it was also reported that the government of Indonesia scrapped the tax on land and buildings for oil & gas firms that are in the exploration stage, effective from this month. This decision was made in an attempt to attract more investment in the country’s oil & gas sector. Indonesian Finance Minister Bambang Brodjonegoro said that the tax had been ineffective.
Indonesia particularly needs investments in the oil sector as the country’s oil output has declined drastically in the past two decades due to a lack of exploration amid weak government management, bureaucracy, an unclear regulatory framework and legal uncertainty. Last year, Indonesia only produced 794,000 barrels per day (bpd), below the target of 818,000 bpd that had been set in the revised 2014 State Budget. In 2015 the government targets to achieve a total of 849,000 bpd. However, the country has set a solid track record of failing to achieve its oil lifting target. Indonesia, a former OPEC member, had an oil production peak of 1.6 million bpd in 1995 during Suharto’s New Order regime.