Monday, 6 April 2015


The investment Coordinating Board (BKPM) encouraged a special electricity rates policy for labor-intensive industries in order to improve product competiveness in the Asian region. Head of BKPM, Franky Sibarani, on Friday (March 6), said that the policy was necessary because the cost of the minimum wage, as labor-intensive industries contributed 20%-25% of production costs. He said that the results of labor-intensive industry investor forum and BKPM study show that if electricity cost can be reduced, the competitiveness of labor-intensive industries will increase.

For comparison, the electricity industries in Indonesia outside peak hours reached USD 0,060 per kWh. While, electricity tariff in Vietnam is USD 0,038. BKPM proposes special rates for labor-intensive industries outside peak hours, so it can compete with Vietnam. Franky added that is party would send letter to the relevant ministries and institutions in order to coordinate the proposal. He hopes that the government could soon issue special electricity tariff policy labor-intensive industries, to encourage more investment in labor-intensive industries. Previously, the businesses also have submitted a similar proposal.

Based on BKPM reports, foreign direct investment (FDI) that flows to Indonesia from January 1 to February 27, 2015 reached USD 2.7 billion. It consisted of USD 1.26 billion of investment in labor-intensive industries, USD 1.16 billion import substitution, USD 216 million downstreamization of agriculture (cocoa, rubber, and CPO), and USD 10 million electricity. Meanwhile, the relevant criteria to determine foreign investor level is based on the level of seriousness, he explained that BKPM has three categories, namely serious, interested, and prospective. He described that the criteria of serious, interested, and prospective. He described that criteria of serious investors is that they have met several times with the BKPM marketing officers in Indonesia and have visited the location to be used for their investment projects.

In addition, foreign investors must have a local partner as a work partner in Indonesia and have a clear business plan. At least they already know what is needed, ranging from land size, employment, production capacity, machinery imports, and the percentage of product exports. While, those included in the criteria of interested investors are those that have met with marketing officers in Jakarta, but only once and still consider the constraints for running business.

Regarding prospective investors criteria, he explained that investors who are in this category usually still in the stage of “capturing” by BKPM market-representative offices in some countries (IIPC) and the Indonesia Embassy. For 2015-2019, BKPM is targeting a total number of principial license (IP) of IDR 5,864 trillion of foreign investment to meet the target of investment to meet the target of investment realization of IDR 3,500 trillion.

On the same occasion, Franky also noted that BKPM will provide investment guarantees for the existing investors in water industry following the removal of Water Resources Act. He said that the government had agreed that companies who already have a license (including Groundwater Permit/SIPA) and already in operation, can still operate as usual until there is a new regulation. He remained the existing investors in the water-based industry not to feel anxious. The government, in this case BKPM and other related ministries, agreed to continue to support investors who have entered and made investment. New regulations to provide legal certainty to investors are being prepared. (E) 

Business News - March 11, 2015                                            

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