The DNI is a list of business areas closed to foreign investment and new investment. Hence, there is concern that the exclusion from the DNI of certain business areas would sacrifice the interest of micro-, small-, and medium-scale businesses (UMKM).
Coordinating Minister for Economy, Darmin Nasution, denies allegation that the government is allowing foreign investment to operate in areas appropriately designed for UMKM businesses and cooperatives.
The protest and allegation came on wrong perception over four business areas which are appropriated for UMKM and cooperatives under the DNI of 2016.
The four business areas include tuber peeling and cleaning industry; cloth printing industry; knitting industry, particularly embroidery; and internet service outlets.
"It is impossible that foreign investment would operate in tuber peeling and cleaning industry and internet service outlets as a foreign investment company is required to start businesses with a capital of at least Rp10 billion. Those (businesses) are not Rp10-billion class venture," Nasution noted.
In the meantime, Minister of Industry Airlangga Hartarto remarked in Jakarta on Monday (Nov 19) that the development industry could be boosted if investment increased. Thus, the government opens certain business areas in the list to attract investment.
"Hence, DNI relaxation policy is expected to generate new investment that will in turn result in additional new processed and highly value-added products," the minister revealed.
In the manufacturing industry, several business fields are opened to investment, namely knitting industry; crumb rubber industry; coconut cake industry; soybean source industry; milk processing; sweetened condensed milk; wood-based product; essential oil industry; and the nail, nut, and bolt industry.
The minister added that relaxation in this business sector was made on the basis of a solid reason. For instance, crumb rubber was eliminated from the DNI, as during the 2012-2016 period, the number of businesses operating in that sector only increased by one unit, from 201 to 202 units.
Hartarto remarked that the cloth printing and knitting areas were removed from the DNI, as products of these areas could not as yet meet the increasing demand. The demand for printed and knitted clothing reached 236 thousand tons per annum, while production at home only reached 169 thousand tons. Hence, the imports of printed cloth continue to increase from year to year.
"In order to stamp down the import of printed cloth, the cloth printing industry`s investment at home needs to be increased. On the other hand, investment requirement for the cloth printing industry reached some Rp100 billion, a business scale that is not classified as UMKM," Hartarto explained.
"Hence, relaxation of the DNI is open to domestic and foreign investment. However, there is a special provision for UMKM and a provision that restricts foreign investment," he elaborated.
The minister explained that the sector is open, as there was no significant investment over the past three years.
Hartarto stated that in relaxing this DNI, there was no obligation for the industry to cooperate with other companies in the same field. "Hence, we release this. We then gave some new ones to UMKMs, including the seaweed industry," he noted.
To boost investment in the cloth printing and knitting industries, the government included them in the industry categories that can utilize the tax allowance facility. The tax allowance facility is offered to medium- and large-scale businesses, so that investment in these areas will continue to develop and expand.
In the DNI revision, the government continues to safeguard several business areas to protect UMKM businesses. Business areas with requirements reserved for UMKM and cooperatives included tempeh, tofu and soybean-based food, red sugar, written batik, embroidery, and rubber fumigation industries.
"The government has also decided on business fields that are open to investment with the requirements of partnerships with UMKM and cooperatives, so that foreign investments can enter and have a positive impact on the transfer of knowledge and technology," he explained.
The Minister of Industry remarked that 87 business sectors had been excluded from the DNI, including the earlier government policy through Presidential Regulation No. 44 of 2016.
"The government hopes that this relaxation policy would succeed in increasing investment, especially if it is combined with other fiscal policies and instruments, such as tax allowances and tax holidays," he added.
At present, two additional sectors to receive tax holiday facilities are the agricultural, plantation and forestry-based processing industries, and the digital economy sector.
The government also includes the sectors of main computer components and the main smartphone components into the main electronic component sector/telematics equipment that can receive tax holiday facilities.
The government recently announced its relaxation policy of the DNI, revising Presidential Regulation (Perpres) No. 44 of 2016 as part of the 16th economic policy package. The relaxation of the DNI is intended to boost domestic and foreign investment. Thus, the policy is more promotional in nature.
The number of industries in the 2014-2017 period rose by 5,898 units, from 25,094 to 30,992. In addition, from 2014, the number of small-scale industries also increased, from 3.52 million to 4.49 million in 2017, which means they increased by 970 thousand units in the four-year period.
Editing by Sri Hariyati
(T.A014/A/KR-BSR/S022) 20-11-2018 17:33:51