Manufacturing in Indonesia is vital in attracting foreign investments, contributing to nearly a quarter of the national GDP and employing over a fifth of the working population. Among the notable industrial parks in the country, Kendal Industrial Park (KIP) stands out as a premier destination for international investors.
This article delves into the advantages KIP offers, its strategic location, incentives, and the support services provided by Cekindo, an expert business advisory firm.
Growing Manufacturing Sector
The Prompt Manufacturing Index – Bank Indonesia (PMI-BI) reflects a positive trend in Indonesia’s manufacturing sector. In the first quarter of 2021, the PMI-BI increased to 50%, up from 47.29% in the previous quarter. The projection for the second quarter is an even more promising 55.25%.
Industrial Estates for Balanced Economic Growth
The Indonesian government has mandated industrial businesses to operate within industrial estates to promote equal economic growth. There are 87 industrial estates covering approximately 86,000 acres across the country. These estates, including Kendal Industrial Park, relieve industrialists of infrastructure concerns, allowing them to focus on their core manufacturing processes.
Advantages of Kendal Industrial Park
Kendal Industrial Park is a government-to-government project between Indonesia and Singapore, attracting numerous international investors. Here are the key advantages offered:
1. Infrastructure
Reliable access to electricity, water, and transportation networks, including ports and major routes. Comprehensive industrial waste disposal systems are provided to tenants.
2. Financial Incentives
- Corporate income tax reductions range from 30% to 100% for up to 15 years, depending on the chosen Industrial Estates Development category.
- Exclusions apply to specific criteria, such as small and medium-sized companies operating in regions without industrial estates.
Kendal Industrial Park: A Prime Investment Destination
Kendal Industrial Park is the most extensive industrial township development in Central Java, covering over 2,200 hectares. It has attracted over 61 tenants from various industries, including food, furniture, stationery, and warehousing. The following factors contribute to its optimistic outlook:
Sembcorp Involvement
Sembcorp Development, a reputable Asian developer with extensive experience in industrial park development, instills trust in local and international investors.
SEZ Incentives
As part of the Indonesia Special Economic Zone (SEZ), KIP offers additional benefits to businesses, including tax reductions, exemptions, and extended visa and residency permits for foreign investors.
Integrated Infrastructure
Kendal Industrial Park benefits from its integration with major cities through the Trans Java toll road, proximity to an international airport, well-connected seaports, train access, and ring roads.
Competitive Wages
Kendal offers lower minimum wages compared to other industrial cities in Indonesia, providing cost advantages for investors.
Human Resources Availability
Central Java boasts a large pool of qualified and skilled human resources, with thousands of graduates each year from colleges, universities, and vocational schools. Investments in Kendal Industrial Park have also lowered the region’s unemployment rate.
Conclusion
Kendal Industrial Park in Indonesia presents many opportunities for investors looking to establish manufacturing units. With its robust infrastructure, attractive incentives, strategic location, competitive wages, and abundant human resources, KIP is an ideal choice for business ventures.
By partnering with InCorp Indonesia, you can navigate the complexities of foreign investment and make the most of the untapped potential in the Indonesian manufacturing sector. Contact us today to explore how they can assist you in business set up to invest in Indonesia.
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Disclaimer
The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.
We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.
Verified by
Ales Cina
Consulting Manager at InCorp Indonesia
Aleš manages solution delivery at InCorp Indonesia, optimizing incorporation processes and client relationships. His experience in internal auditing, retail, and sales offers valuable global insights. Aleš, with a degree in Economics and Finance from the Czech Republic, helps clients navigate cross-border business challenges, focusing on cultural and legal insights.
Frequently Asked Questions
- Import facilities
Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production. - Tax holiday
The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status. - Tax allowance
For companies in certain designated areas or regions, the government may provide the following tax concessions:
Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
Accelerated depreciation and/or amortisation deductions
An extension of tax losses carried forward for a maximum of ten years
A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
The applicant eligible has to meet high-level-criteria for the above tax facilities:
High investment value or for export purposes
High manpower absorption
High level of local content - Investment allowance
The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project. - Super deduction
This facility could be granted to certain businesses, such as:
60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.
A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.
Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.
It all depends on your business’s purpose and nature. Our consultants will help you to clear out the matters.
A limited liability corporation is required by Indonesian company law to have two or more shareholders, who may be either a legal entity or an individual. The foreign investor must find a second shareholder to own shares in the PMA firm for investments that are 100% open, which could be an affiliated party.
CV (Commanditaire Vennootschap) is a proprietary business entity that houses several individuals to run a business.
