From Government of Indonesia

Investment Law Passed

The House of Representatives on Thursday (29/3/07) passed the long-awaited investment law designed to provide various incentives for both local and foreign investors.

Among the incentives are exemptions or reductions of income tax, import duties and value-added taxes; accelerated accounting of asset amortization and depreciation; and exemptions or reductions of land and building taxes, according to a draft of the law seen by Dow Jones Newswires.

The Finance Department will issue further details on the incentives, according to the draft.

The new law aims to increase competitiveness in attracting foreign investment with regional rivals including Singapore, Thailand and China, Trade Minister Mari Pangestu said after the bill's approval.

Investment in Indonesia rose 2.9% last year, lower than the economy's 5.5% growth.

The investment law's passage is one of a series of policy measures analysts describe as essential to lure foreign investors.

Besides fiscal incentives, the law also provides for government assistance to some investors in terms of acquiring land, obtaining visas to Indonesia and securing import licenses.
Government implementation of the law will include the creation of a "one-stop" investor service facility and the reduction in the official approval process for investment licenses to 30 days from a current 97 days, Pangestu said.

Pangestu said the law will extend land ownership for investors to 95 years from a current duration of 60 years and also calls for the creation of a blacklist of potential investors unwelcome to invest in Indonesia.

Investments that will qualify for the new incentives are those that will create "many jobs, investments in industries of high priority, investment in infrastructure projects, and are located in remote areas," according to the draft.

Incentives will also be channeled to investments that bring in new technologies; are environment-friendly; promote research, development and innovation; utilize locally produced capital goods and partner with small- and medium-businesses.
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