Indonesia to offer tax holiday to companies investing in new capital

By Stanley Widianto and Stefanno Sulaiman

JAKARTA (Reuters) – Indonesia will offer generous incentives, including a 30-year tax break, to companies investing in a $32 billion project to build a new capital city called Nusantara in the country, an official said late Tuesday.

Bambang Susantono, head of the Nusantara National Capital Authority, made the comments at a meeting with hundreds of domestic and foreign investors in the current capital, Jakarta.

Construction of a dam and roads has started at the site of the new capital, he said, currently an underdeveloped area fringed by Borneo’s vast rainforest.

Up to 100,000 construction workers will accelerate work next year to complete the site by Aug. 17, 2024, when President Joko Widodo was set to celebrate Indonesia’s Independence Day at a new presidential palace, Susantono said.

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Susantono urged the assembly to consider investing in areas such as healthcare, education and entertainment in the new capital and promised tax incentive regulations would be released soon.

The incentives include a tax holiday of up to 30 years and a 350 percent “super tax deduction” for research and development, more generous tax breaks than for investments in other Indonesian cities, he said

“This is a lifetime opportunity…to build this city,” he said, adding the government will create a business unit to speed up deals with the private sector.

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At the meeting, which was also attended by the President, an executive at Indonesian hospital operator PT Medikaloka Hermina pledged to invest in Nusantara.

In his speech, the president, better known as Jokowi, attempted to allay concerns about Nusantara’s future after the end of his second term in 2024.

Jokowi is constitutionally barred from seeking a third term and there have been questions over whether his successor will support the project, which some have criticized as wasteful spending in tough economic times.

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“Everything was approved by 93% of the parties in Parliament. If one of you is still unsure, what is still missing? There is no longer any need to ask questions,” Jokowi told investors.

A June survey of 170 experts by the Indonesian Center for Strategic and International Studies found that nearly 59% were unsure whether the Nusantara project would materialize, citing uncertainty about funding and management.

(Reporting by Stanley Widianto and Stefanno Sulaiman; Editing by Gayatri Suroyo and Ed Davies)


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