We are pleased to announce that the application to the Ministry of Investment and Downstream Industry ("BKPM") by PT Synergy Tharada ("PT Synergy") for classification of the New Batam Centre Land Reclamation and Development Project ("NBC Land") to be designated a National Strategic Project (Indonesian: Proyek Strategis Nasional, abbreviated "PSN") has been accepted in principle via letter dated 22nd October 2024.. We are further pleased to note that this meeting which recently concluded, ended favourably, and the application for PSN classification is well underway.
1. BKPM is a government agency responsible for coordinating policies and providing services related to investment in accordance with the provisions of legislation[1] including serving as a gateway for PSN designation, which are selected based on their contribution to increasing economic growth, equitable development, community welfare and regional development.
2. The PSN framework was established in 2016, and since then, the Indonesian government has completed 190 PSNs from 2016 to 2023 and predicted to absorb a workforce of 2.81 million individuals and bolster economic growth by 5.2%, with total investment cost of IDR1,515 trillion (USD96 billion) as at Feb 2024 with IDR475 trillion (USD30 billion) completed in 2023 alone[2].
The project being designated as a PSN should come as no surprise, given the NBC Land project is planned to serve as an avenue to showcase Indonesia's potential by combining a world-class port with top-tier residential, retail, and commercial spaces, on a self-contained island, where the NBC Land project is expected to generate substantial growth for the Batam region, uplifting the local economy and community.
Fiscal Incentives: PSN project designation implies that the project has the full support of the Indonesian Government, which stands behind the project and is committed to ensure its success. This greatly improves avenues and flexibility on the financing front, given the additional comfort offered to financiers, where the Indonesian government may offer guarantees on certain projects, especially those related to infrastructure, through institutions like the Indonesia Infrastructure Guarantee Fund (IIGF) to protect financiers from risks related to changes in government policies or delays due to bureaucratic processes.
Tax Benefits: Designated PSNs may benefit from substantial tax breaks, with reductions in corporate income tax (up to 100% for 30 years on more ambitious projects), particularly those in infrastructure and energy sectors. These tax incentives are expected to positively impact the NBC Land project and IWT tokens by decreasing the amount of value leakage due to tax payments.
Streamlined Licensing and Regulatory Compliance: The Indonesian government has enacted measures to simplify licensing processes and other such related regulatory processes for PSNs which addresses a common challenge for investors, aiming to cut red tape and increase project feasibility, making it easier for companies to meet regulatory requirements and begin development more quickly. Streamlined licensing and regulatory compliance will allow a smoother execution of the project by reducing administrative bottlenecks and providing faster project approvals, mitigating risk from delays from any further regulatory requirements which may arise on the path to completion.
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As the project progresses, obtaining the PSN designation is expected to further improve on the already solid foundation of the NBC Land project from an economic and regulatory standpoint via the uplift of economic benefit from tax reductions, improvement of financing options and prospects, and reduction of execution risk in the form of regulatory challenges.
Things are progressing well, and we look forward to sharing with you more good news soon.
HKTDC Research "ASEAN Ascends – Indonesia In-depth: Investment and Supply Opportunities".
Link: https://research.hktdc.com/en/article
/MTYyMTg4MTE5Nw
Economic Research Institute for ASEAN and East Asia "Introduction of National Strategic Projects". Link: https://www.eria.org/uploads/04_Ch_1-Introduction.pdf
This post constitutes the author's personal opinions, and should not be taken as a recommendation or advice for any kind of investment or securities. Kindly consult your financial, legal, tax, or any such other advisors for your specific needs accordingly.
