The Indonesian government has encouraged the China-led One Belt One Road initiative, tipping the establishment of a Special Economic Zone to ensure investment is spread across the country.
Oke Nurwan, the General Director at the International Trade Directorate, said that for the plan to be realised, the government must ensure the infrastructure for the Special Economic Zone is prepared to host investment and business activity.
Currently, two Special Economic Zones have been established in Indonesia – Sei Mangkei in North Sumatra and Bitung in North Sulawesi. The Bitung Special Economic Zone is the centre of the fisheries and the pharmaceutical industries, while Sei Mangkei is the centre of the petrochemical industry.
“We suggested for the investment to be channeled to the Special Economic Zone. What’s left for us is to prepare the zones so it will be suitable for manufacturing activities. For now, Bitung is the only one that’s ready for economic operations,” Nurwan said, as reported by Bisnis.
The government also assured investment commitments will not be related to any kind of bilateral debt arrangement.
“The project is pure business to business thing. It will be withdrawn from investment funds, not from loans,” Nurwan added.
Investors putting their capital in the Special Economic Zones will have easier access to licenses and fiscal incentives, Narawan said. This includes land acquisition, corporate income tax discount, exemption from imposition of import and export duty, reduction of value added tax and sales tax on luxury goods.
He also believes that China’s ambition in increasing connectivity will impact the domestic trade climate significantly.
“We won’t be getting incoming investment as our only benefit, but we also will get the chance to strengthen our trade connectivity,” Nurwan said.
Minister of National Development Planning Bambang Brodjonegoro said that China’s initiation in developing the One Belt One Road concept is in line with Indonesia’s desire to further develop regions outside of Java. Ideally, foreign investment would be spread equally across the country.
Image credits: Jiipe