JAKARTA — Indonesia will offer tax holidays of up to 25 years and relax restrictions on foreign investment in its special economic zones in the latest announcement aimed at stimulating growth in Southeast Asia's largest economy.
Chief economy minister Darmin Nasution told reporters on Thursday that investors in special economic zones would be eligible for income-tax discounts of between 20% and 100% for 10 to 25 years.
The most generous tax incentives will be offered to firms that invest in priority sectors identified by each zone's operator.
Under existing rules, investors across Indonesia can apply for tax holidays of up to 15 years, extendable for a further five years with approval from the finance minister.
Foreigners would also be permitted to own property in special economic zones, and firms there would be able to import raw materials without paying value-added tax, Nasution added.
"This is our effort to stimulate economic activity in the periphery of the country through special economic zones," he said.
Indonesia currently has eight special economic zones specialising in activities from palm oil and petrochemicals to tourism but so far only two of them have started operating.
All but one of the zones are outside Java, Indonesia's economically dominant island.
Frank Sibarani, the head of the Indonesian Investment Coordinating Board (BKPM), told reporters that firms operating in the zones would be exempt from the negative investment list, which sets limits on foreign involvement in many sectors of the economy.
Thursday's announcements are the latest in a series of stimulus measures rolled out by President Joko Widodo's administration since September, including lowering energy prices, cutting red tape and reforming the minimum wage formula.
Higher government spending and investment helped Indonesia's struggling economy grow slightly faster in the third quarter, but not enough to show a real turnaround has begun.
Gross domestic product expanded 4.73% from a year earlier, the statistics bureau said on Thursday. That was faster than 4.67% in the previous quarter - the slowest in six years - but below a Reuters poll median of 4.79%.
Widodo wants to attract more investment with incentives but at the same time his government faces a shortfall in tax revenue expected to reach 160 trillion rupiah (US$11.80 billion) this year.