Sunday, 30 November 2008

Income tax facilities

The Chairman of Investment Coordinating Board (“BKPM”) issued the guidelines and procedures for submitting an application of income tax facilities for the Investment Company in the certain sectors and/or regions (BKPM Regulation No.2/P/2008 of 2008)(October 14, 2008). The said regulation sets out the guidelines for the Company to obtain the income tax facilities. The Company shall submit the application of income tax facilities to Ministry of Finance through the Chairman of BKPM. Then, BKPM issues the recommendation letter if the applicant has fulfilled all the requirements. Based on the recommendation letter of BKPM, the Ministry of Finance will issue grant the income tax facilities to the respective applicant.

Economy grows by 6.1% y-o-y in Q3

The economy grew by 6.1% on a year-on-year basis in the third quarter of 2008, with 3.5% growth during the quarter with agriculture putting on the strongest growth at 6.7% during the quarter, according to figures released by the Central Bureau of Statistics (BPS). Without the contribution from the oil and gas sector, growth during the quarter was 3.7%. Trading, hotels and restaurants put on the second strongest level of growth per sector at 4.6%, transport and communications by 4.2%, while manufacturing grew by a surprising 3.2% to take fourth position. Services was the slowest sector with growth of 0.9%. The Business Tendency Index, based on a survey of 2,500 large and medium companies during the quarter, showed a continuing improvement in conditions over the second quarter of the year. All sectors showed improvement except mining, which experienced a slight fall.

2008 budget deficit likely lower than targeted

Indonesia's 2008 budget deficit is likely to be a lower-than-targeted 1.1% of gross domestic product (GDP) due to higher tax revenue and improved cost efficiency, a top finance ministry official said on Thursday, Reuters reported. The finance ministry had previously forecast a deficit of 1.3%.
"We project a budget deficit at 1.1% of GDP, or around Rp51 trillion," Abimanyu said, adding that the lower-than-expected budget spending was the result of enhanced efficiency in government.
The ministry targeted Rp895 trillion of revenue in its revised 2008 budget, with revenue from tax expected to reach Rp609.2 trillion.
The ministry regularly holds debt auctions every month to finance its budget deficit but in October had said it might cancel its planned domestic debt auctions this year due to turmoil in financial markets.
The ministry had bought back Rp41 billion ($3.37 million) worth of bonds and the central bank bought Rp333 billion worth of bonds in the secondary market as part of the authorities' measures to restore investor confidence and stabilize financial markets.

TDL will not be lowered

State Electricity Company (PLN) stressed that it will not lower the base electricity tariff (TDL) for households and industries although the price for power plants’ fuel has plummeted. According to PLN’s President Director Fahmi Mochtar, the fall of crude oil price does not impose significant impact to the electricity’s production cost. The weakening of rupiah against the US dollar already affected the SOE’s performance, such as for the maintenance of PLN’s power generation equipments, which are mostly imported.
Source: PA Asia - Public Affairs and CSR from Investor Daily, 24 November, p.20.

European Joint Breakfast Meeting with Chatib Basri:

At a joint breakfast gathering of the European Chambers of Commerce this morning, economic adviser to the government Chatib Basri forecast Indonesian economic growth for next year to fall into the lower part of between 4.5 and 5.5% in 2009. Indonesia has a lower export ratio than most other countries in the regions (around 30% of GDP), but Indonesia will also feel the impact of lower export growth of the industrialized countries in Indonesia that buy Indonesia's raw materials. Moreover, Indonesia as an emerging market, will suffer from capital withdrawals that are caused by the credit crunch in the United States and Europe. Government bonds in the United States are still regarded as a safer investment, and the demand for dollars has been pushing up the dollar against Asian and other currencies. Because of the withdrawals of portfolio investment and lower rates of foreign direct investments, Indonesia's overall balance of payments will deteriorate and put pressure on the rupiah. For next year, a US$-Rupiah rate of between 10.000 and 12.000 is expected. In recent years, growth and credit expansion have been particularly brisk in the outer regions (Sumatra, Kalimantan and Sulawesi), but the lower commodity prices will reduce the economic growth in these areas. Chatib expects commodity prices not to fall any further, but to recover gradually over the next year. The Indonesian government will initially try to reduce the budget deficit from the current 1.9 % of GDP to 1% of GDP, but will also start spending on new infrastructure projects in the course of next year. With this spending, partly in for of cash-for-work local infrastructure, the government will also try to keep consumption going. Consumption at 65% of the economy is an important driver for growth.

Implementation of foundation law

Indonesian Government issues a new Government Regulation regarding Implementation of Foundation or Yayasan Law (“Government Regulation No.63 of 2008 or GR 63/08”)(“September 23, 2008”). This regulation stipulates that Foundation shall be registered on the Registration List of Foundation. The required capital for the establishment of foundation is in the amount IDR 10.000.000 if the founders are Indonesians and IDR 100.000.000,- if the founders are foreigners. The foreign foundation may conduct its activities in Indonesia only in sector of social, religious and humanitarian activities.

Central Java Investment Business Forum, Jakarta November 26

This event will be an excellent opportunity to hear from the recently elected Governor of Central Java, Bibit Waluyo, his top staff, and a number of Mayors and Bupatis, and potential business partners. Information on investment projects will also be available, and there will be time for one-on-one meetings regarding the projects and other business opportunities. You will also be able to meet representatives of the recently launched investment promotion agency Central Java Invest.

Reduced budget deficit forecast for 2008: Government

Indonesia's budget deficit is forecast to drop to 1.1 percent of the country's gross domestic product (GDP) this year due to lower-than-expected spending and a rise in tax revenues, the Finance Ministry says.
"The realization of expenditure throughout the year is forecast to reach 90 percent *of the budget*, while we project tax revenue will reach 105 percent. Therefore, we project only a 1.1 percent deficit," Anggito Abimanyu, the ministry's head of fiscal policy, said Thursday.
The ministry has earlier predicted a deficit of 1.9 percent of GDP, or Rp 90.6 trillion.
Tax revenue makes up about 70 percent of state revenue, which is projected to reach Rp 894.99 trillion in the 2008 budget. Anggito added the government had a surplus in its balance, meaning that available funds could be used to fund the 2009 budget.
"In 2009, the conditions are uncertain. An economic slowdown may adjust the 2009 forecast."
The government has provided a total of Rp 12.5 trillion in incentives -- mostly in the form of reduction or elimination of taxes and import duties -- to industries next year to stimulate the real sector. Only industries operating in the food, energy, public service and selected sectors will receive such benefits, Anggito said.
The ministry expects Indonesia's economy to grow by slightly above 6 percent in 2008, after estimating the budget conditions. "The economy this quarter will be slightly below 6 percent, but overall 2008 (economic growth) will be above 6 percent."
According to the Central Statistics Agency, the economy grew by 6.3 percent in the first nine months of 2008.