The Investment Coordinating Board (BKPM), the investment service agency of the Indonesian government, claims it has prevented about 24,500 of layoffs through its special desk for footwear and textile industries, according to newspaper reports.
This special desk is an agency set up by the BKPM in early October 2015 to support local companies in the footwear and textile industries as these industries are considered most affected by the country’s economic slowdown. BKPM Chairman Franky Sibarani said a total of 48 companies have requested support through this special desk.
Sibarani said BKPM has undertaken a three-pronged strategy to support local companies and avert possible layoffs. They include short-term assistance by which the government provides financial assistance to ensure normal operations are not disrupted at the local company. Under medium-term assistance, the help-desk combats illegal imports which are often cheaper and thus make products manufactured by local companies less competitive. And under long-term assistance, the Indonesian government is making efforts to enhance competitiveness of Indonesian export products on the global market by seeking free-trade agreements with the European Union and the US.
The BKPM also proposes to offer tax incentives for investment in the garment and footwear industries located in Java. In case an investor invests at least 50 billion rupiah (approx. $3.6 million) and absorbs at least 2,000 Indonesian workers, the investor should be granted a tax allowance.
“We also proposed a 50 per cent reduction in income tax for companies that employ up to 5,000 workers and export 75 per cent of its products abroad,” Franky said.
The current regulation on tax allowances, which came into force on May 6, does not set a minimum limit for the size of the local or foreign investment, percentage of exported output, a portion of local content in the products, nor the number of jobs available to Indonesians.
Based on data from the BKPM, investment realization in Indonesia’s textile and footwear industries stood at 11.6 trillion rupiah in the first nine months of 2015. Investment in the textile industry rose 148 per cent (y/y) to 9.8 trillion rupiah, while investment realization in the country’s footwear industry fell 35 per cent (y/y) to 1.6 trillion rupiah. (SH)
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