When Luhut Met Yellen, Covid Cases Fall, Energy Transition Roadmaps, Tax Incentives for F&B Industry
Sep 19, 2022
Luhut Meets Treasury Secretary Yellen
Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan met with US Secretary of the Treasury Janet Yellen on Sept 16 in Washington, DC. The meeting was a follow-up to the G20 meetings in July, and touched on a number of issues, particularly Indonesia’s energy transition.
During the meeting, Yellen shared progress on the development of the Just Energy Transition Partnership for Indonesia, which supports the acceleration of Indonesia’s transition from coal to cleaner sources of energy. Yellen commended the recent issuance of the Presidential Decree on Renewable Energy, and acknowledged the efforts Indonesia has made to develop and implement its ambitious power sector transition strategy.
Luhut and Yellen also discussed ways to overcome the high global cost of energy, such as by maintaining stable energy prices and ensuring stable oil flows to the international market in the short term.
Covid Cases Down, Jakarta Still Largest Contributor
Indonesia’s new daily Covid-19 cases continue to fall, with Sept 18's 1,683 down from 2,079 the day before. There were 27,858 active cases on Sept 18, down from 33,946 on Sept 11. Jakarta continues to dominate daily cases at 794 people, with the next highest, West Java, only having 260. The total confirmed cases in Indonesia reached 6,408,806.
Responding to the downtrend and the recent World Health Organization’s statement on the end of pandemic, Ministry of Health spokesperson Mohammad Syahril said Indonesia needs to keep its guard up by accelerating vaccination, testing and sequencing; preparing an adequate health system for handling Covid-19; and accelerating preventive measures. Getting vaccinated and complying with health protocols are imperative to prevent future Covid-19 waves, he added.
EY Indonesia continued to support the Center for Environmental, Social and Governance Studies (CESGS) for the Sustainable Financial Lab (SFL) program through a mentoring session for Airlangga University students in early September. Around 150 students were present to meet and learn from EY professionals about the application of environmental, social and governance aspects in growing micro, small and medium-sized enterprises (MSMEs). A total of 15 mentors and four facilitators from EY Indonesia also participated throughout the sessions.
The first course, Income Tax of SMEs (small and medium-sized enterprises), was presented by the EY tax team, enabling participants to acquire basic tax entrepreneurial skills for sustainable small-scale businesses. The second and final day was led by the EY consulting team, sharing insightful information on the topic of financial processes and financial statement preparation.
Through its Ripples initiative, EY is committed to contributing to a more sustainable business by aiding MSMEs, and positively affecting future economic growth. Given the youth’s high level of interest, EY is confident Indonesia will improve its performance in producing more sustainable businesses for SMEs.
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Moving forward on Indonesia’s goal of net zero emissions, the Ministry of Finance plans to issue three roadmaps on energy transition, the carbon tax and the carbon market. The three are expected to spur demand in the carbon market, given Indonesia’s huge resources.
The government hopes the roadmaps will be completed and issued before the G20 Summit in Bali, Special Staff of the Finance Minister Masyita Crystallin said. The implementation of the carbon tax will align with the roadmaps to prevent carbon price fluctuations. Previously, Finance Minister Sri Mulyani Indrawati said the implementation of the carbon tax would be based on the country’s economic outlook and that it must be done very carefully, especially in the midst of the global food and energy crises.
Indonesia has already issued a Presidential Regulation regarding New and Renewable Energy (Perpres EBT), and the government plans to decommission some coal-fired power plants. The plan is still being discussed by the Ministry of Energy and Mineral Resources along with the Asian Development Bank (ADB) and the World Bank, but the Ministry expects it to be concluded by the end of 2022.
Industry Ministry to Offer Tax Incentives for F&B Industry
The Ministry of Industry has prepared fiscal and non-fiscal policies to support and improve the performance of the country’s food and beverage industry. They include tax incentives such as tax holidays, tax allowances, super tax deductions, and government-borne import duties.
The F&B industry is one of the main components of the national manufacturing sector and overall economic development. After being badly hit by the Covid-19 pandemic, the industry grew 3.68 percent in the second quarter of this year and contributed 38.38 percent to gross domestic product (GDP) sourced from non-oil and gas industries, Ministry of Industry data shows.
In July, the industry called for incentives and support from the government to help minimize the impact of inflation and raw material price fluctuations. Companies in the industry cannot continue to strategize their operations and substitute raw material imports without assistance, Chairman of the Indonesian Food and Beverages Industry Association (GAPMMI) Adhi Lukman said.
Call to Arms for Regional Governments to Combat Inflation
In a meeting with regional leaders, President Joko Widodo said local governments must focus on curbing inflation, with the recent increased price of subsidized fuels expected to trigger higher inflationary pressures. Widodo asked for full cooperation in fighting inflation.
Minister of Finance Sri Mulyani Indrawati also told regional leaders to use the contingency budget allocations (BTT) to provide subsidies to the people, as there is still Rp 9.5 trillion in unused BTT. She also promised to provide incentives to local governments that drive down regional inflation below the national level.
Coordinating Minister for Economic Affairs Airlangga Hartarto also told regional leaders to study the food chain supply in their regions, and find ways to smooth out the supply chain to achieve cheaper prices.
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AmCham Update is AmCham's regular newsletter on developments related to the pandemic crisis and other issues in Indonesia. It is edited by AmCham Managing Director A Lin Neumann and written by the AmCham Staff. Paul L Goddard is the Managing Editor.