AmCham Update Vol. 4 #124

Airlangga Signs IPEF Agreement, TikTok Seeks Local E-commerce Alliances, AmCham Goes to Nusantara, Healthtech Industry Challenges, 2023 Tax Revenue Target Hiked

Nov 17, 2023

Indonesia Signs IPEF Supply Chain Agreement

The Indo-Pacific Economic Framework (IPEF) Supply Chain Agreement was signed by Indonesia and 13 other IPEF member states during the IPEF Ministerial Meeting in San Francisco, US, on Nov 11.

The agreement, signed by Coordinating Minister for Economic Affairs Airlangga Hartarto, aims to bolster Indo-Pacific supply chain resiliency and competitiveness, business matchmaking, and labor rights. There are also plans for three working groups: the IPEF Supply Chain Council, IPEF Supply Chain Crisis Response Network, and IPEF Labor Rights Advisory Board.

Indonesia remains committed to strengthening the regional supply chain, Airlangga said, adding that the government will take steps to implement the agreement domestically in coordination with relevant parties.

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TikTok Explores Local E-commerce Alliances

TikTok is exploring potential collaborations with local e-commerce companies to maintain its presence in Indonesia.

TikTok is in discussions with local e-commerce companies including Bukalapak, Blibli and GoTo-Tokopedia to advance its e-commerce business in Indonesia, said Minister of Cooperatives and Small and Medium-sized Enterprises (SMEs) Teten Masduki.

Teten also said he intends to meet with TikTok's Chief Executive Shou ZI Chew by the end of November, to ensure TikTok is committed to a sustainable business in Indonesia without harming local SMEs, and he has also been tasked by President Joko Widodo to formulate a further regulation regarding e-commerce.

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The AmCham Road to Nusantara

AmCham Indonesia hit the road for a trip to the fledgling new Indonesian capital city of Nusantara (IKN) on Nov 16. Departing from Balikpapan at 7am, the journey took 2.5 hours along the area's long and winding roads, and was a good opportunity for the private sector to witness first-hand the new capital's development.

Nusantara has been hailed by the government as a game-changing futuristic and sustainable city. It is part of the 2045 Indonesia Vision – the physical embodiment of President Joko Widodo’s legacy. The government says it will meet its ambitious targets for the project, including hosting next year’s Independence Day ceremony.

Investors have been less enthusiastic, fearing that the return on investment is unclear. A handful of large local developers have broken ground on investment at IKN, however.

The trip was a follow-up to a discussion with the Chairman of the Nusantara National Capital (IKN) Authority, Bambang Susantono, on May 24, at his office in Jakarta, where he invited AmCham to visit the site.

The first stop was the Zero Point, or Titik Nol, situated at the heart of the new city. Inaugurated by President Widodo on March 14, 2022, the geographical center has become a tourist attraction. A new monument will be built at the Zero Point.

Proceeding to the IKN Techno House, the delegation witnessed a display of the city's promised technology, including proposed flying taxis, central command systems, and smart city infrastructure. Adjacent to the venue, AmCham, led by Chairman Douglas Ramage, participated in a tree-planting ceremony.

A lunch and discussion session took place at the worker's housing compound, providing an opportunity for AmCham members to engage with IKN Authority officials. Topics covered included the city's progress, energy requirements, infrastructure, workers and more. On average, around 30 percent of the city is complete from the current target, according to officials.

The delegation then toured construction sites, including the Garuda-shaped presidential palace area, which is around 50 percent complete; the state secretariat building (25 percent complete), and other government structures.

The return journey to Balikpapan concluded with a seafood dinner.

Healthtech Industry Faces Challenges Despite Growth

Healthcare technology start-ups in Indonesia face challenges in terms of market consolidation, funding, and the need to comply with regulations and policies, experts say.

Only 20 percent of start-ups have secured private funding, while the majority either rely on self-funding or operate independently as they struggle to enter the heavily regulated industry. Despite this, the government is seeking to ensure regulations can accommodate the rapid developments in the industry, Ministry of Health Chief Digital Transformation Officer (DTO) Setiaji said.

The Healthtech Indonesia Association (AHI) is working to unite stakeholders, including start-ups, investors, and the government to create a stronger ecosystem, said AHI Secretary General Niko Azhari Hidayati.

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Gov't Increases 2023 Tax Revenue Target

The government has raised this year’s tax revenue target from Rp 2,021.22 trillion to Rp 2,118.34 trillion, through Presidential Regulation 75/2023 on 2023 State Budget (APBN) revision, issued on Nov 10. Revised tax revenue targets include personal income tax (PPh) (from Rp 935.06 trillion to Rp 1.048 trillion), and international trade income tax (Rp 57.74 trillion to Rp 72.89 trillion). The non-tax state income (PNBP) target was also hiked from Rp 441.39 trillion to Rp 515.80 trillion.

Despite the overall increase, some tax revenue targets were cut, including domestic value-added tax (VAT), customs tax, and tobacco and alcoholic beverages excise. The regulation also removes excise revenue targets on plastic products and sweetened beverages as both excise duties have not been implemented this year.

The timing of the revenue target increase is considered unusual, given the upcoming political year, and will not be achieved optimally, Deputy Head of the Asia Pacific Committee at the Indonesian Chamber of Commerce and Industry (KADIN) Budi Suwarso said.

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CLICK HERE FOR PERPRES 75/2023

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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.

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