Jakarta Property Market
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Procon: Jakarta property feels the pinch from global financial crisis
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JAKARTA PROPERTY SECTOR UPDATE
JAKARTA PROPERTY SECTOR UPDATE
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Jakarta Property |
Rusunami subsidized apartments:
Developers eye low-cost apartments More expatriate families living in serviced apartments Jakarta's future buildings to be up close and personal Some of the new rules in the 2007 Spatial Planning Law Land problems leave housing projects in limbo: Govt 'Government must monitor housing project' Urban development project underway
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| Indonsian Tax Laws |
Incentives for taxpayers
Tax rules still unclear for mixed marriages
Incentive set for firms that pay workers' income taxes
Exit tax freed, less red tape?
Unregistered taxpayers to pay double for exit tax Businesses seek extension to tax deadline policy
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Rusunami subsidized apartments: Reaching their
target?
Andhika Suryadharma, analyst A couple of weeks ago I had the chance to visit a property expo held by Real Estate Indonesia, in which a lot of big and small developers participated. Interestingly, BI's recent interest rates increase to eight percent, coupled with soon-to-be administered higher fuel prices, has not dented consumer enthusiasm for property. It was good to see that, amid these difficulties, developers and the government remained creative in jointly introducing a new package, called "Rusunami" (Rumah Susun Hak Milik), offering subsidized apartments to people of lower income brackets. At the expo, I discovered mortgage lending by banks had already undergone upward interest-rate adjustments. A year ago, mortgage loans averaged eight to nine percent fixed for at least one to two years; capped at approximately eleven percent for the third year. This average has now increased by some 200 basis points to between ten and eleven percent. Given the current economic conditions, exacerbated by both fuel prices and toll fares in various areas, it is more favorable for people with activities in urban areas to reside in the city, whereby they can save commuting time and fuel costs. This is particularly true given the government's plan to continuously increase fuel prices until the country is subsidy free by 2010. For an example, let's take John, who lives in Bekasi (on the outskirts of Jakarta) in a 2-bedroom house and spends Rp 600,000 to Rp 800,000 per month on rent. Let us assume his total daily commute covers forty kilometers, and that his car demands one liter of gasoline for every eight kilometers. John pays Rp 450,000 a month in fuel over a five-day working week. Under the government's proposed 30 percent fuel price increase, this sum would rise to Rp585,000 per month. Add on to this Rp 320,000 per month in expressway toll fares, and let's not forget car service maintenance costs, which we will assume to be Rp 100,000 per month, the average amount for a typical sedan car. In total, excluding daily necessities and mortgage payments, John has to bare approximately Rp 1,500,000 (US$160) per month. Now back to Rusunami. These subsidized apartments have a lower price range of Rp 80,000,000 ($8,600), to Rp144,000,000 ($15,500). Rusunami is limited to buyers with a maximum income of Rp 4,500,000 ($500) a month. The apartments are also free of transaction costs, and mortgages are government subsidized. Developers also gain, as they are exempt from incurring 10 percent value added tax (VAT), construction license fees and are eligible to pay subsidized loan payments. While Rusunami appears attractive to those of the lower-income bracket, problems remain. There are early indications the distribution of Rusunmai is being poorly monitored. Initially, the project was targeted at low-income groups, but there have been cases reported where buyers earning Rp10,000,000 ($1,075) per month were able to purchase the apartments. With its publicity spread at the real estate expo, Rusunami will naturally attract those interested in acquiring the apartments for investment purposes. Rusunami apartments in the Cawang area are said to be already sold out. Another issue is whether pricing has been set prudently given the target market. Let us assume a maximum unit price of Rp144 million, and a 15 year mortgage with an 11 percent interest rate. A buyer would have to allocate a monthly installment plan of Rp1.6 million, or 35 percent of their monthly salary. It is clear Rusunami, while appearing a good solution amid a scarcity of city housing, is not a panacea. Stricter application processing by the Ministry of Public Housing, in conjunction with the support of involved developers, may mitigate proceedings and help avoid incidences of false income reports. Despite the government's good intentions, improvements remain needed in monitoring and controlling the proper entitlement of potential buyers. The Ministry of Public Housing must implement a single-door plan to ensure the interest rate subsidies reach the correct hands. The writer is a research analyst at Bahana Securities
Apartments in Jakarta, alternative
residences
Burhanuddin Abe, Contributor, Jakarta Back to the city! That is the dream of today's executives and young families. At a time when the city's traffic is heavily congested, living in the heart of the city is truly advantageous. Clearly not much time is wasted in going back and forth to one's office or school. Indeed, staying in the city center is a luxury and can be quite costly. Most of the land in downtown Jakarta, which is a business and government center, is occupied by office buildings. The balance of land is up for grabs by many residents whose current number exceeds 10 million. This is one of the reasons that apartments in Jakarta are an ideal alternative. Take Puri Casablanca, for example. This strategically located serviced apartment in South Jakarta is promoted as a home minutes from your office and with easy access to five star hotels, shopping malls and restaurants. It has short- and long-term accommodation and offers comfortable living near business centers and public facilities. The elegantly designed apartment suites are complemented by luxurious facilities catering to the needs of international business executives and their families. One can experience the luxurious comfort and convenience of a modern city living in the heart of Jakarta's Golden Triangle. Developers in Jakarta are rushing to build more apartments that are sold on a strata title or freehold basis or are rented out. In Kemang, South Jakarta, for example, The Mansion, Kemang Village and Nirvana are being built. Nirvana is offering exclusive residences in Kemang Raya that have an eco-home theme, which is in accordance with today's trend that emphasizes on the environment. Nirvana Apartments stand on 4,000 square meters of land. There will be 56 units on its 14 floors, with 11 units having their own swimming pools. PT Asiana Lintas Ciptakemang, the developer, designed the apartments in the style of premium homes that have spacious rooms and imported materials. The price of each unit varies from Rp 3.1 billion to Rp 9 billion. Also under construction in South Jakarta is the Senayan City Residence. Just like the shopping mall, the apartments are strategically located close to the SCBD (Sudirman Central Business District). The Senayan City Residence has 67 units and its total leasable area is about 15,635 square meters. Apartments are sold on 35-year ownership leases for Rp 15 million per square meter, or rented on six- or 12-month leases for between US$3,000 and $5000 per month. Meanwhile in Mega Kuningan, prime apartments have been offered since the beginning of 2008. Oakwood Worldwide is a company headquartered in the U.S. and has been in the apartment business since 1960, with more than 30,000 high-quality apartments located in 2,000 cities in North and South America, Britain and several Asian countries. Now it is present in Indonesia under the name Oakwood Premier Cozmo Jakarta. Michael Price, general manager of Oakwood Premier Cozmo Jakarta, said that the occupancy rate of Oakwood apartments in a number of countries was at least 80 percent. He voiced optimism about business in Indonesia as the demand for serviced apartments was high. The reason for his optimism was that Oakwood Premier Cozmo Jakarta has 40 floors with an area of 51,000 square meters built on a lot measuring 5,458 square meters. These are the most luxurious, fully furnished apartments with a five-star rating in the country. Hence, it is a profitable investment with return on investment that is guaranteed in U.S. dollars. Kempinski Residences, meanwhile, says its location is the most strategic, located at Jl. MH Thamrin No 1. The apartments are part of Grand Indonesia, which is a super block constructed on a seven-hectare area, which is the former location of Hotel Indonesia and Hotel Inna Wisata. Here one can find the largest supermarket and shopping area, said to be the most luxurious in Indonesia, as well modern office buildings that house Bank Central Asia and Hotel Indonesia Kempinski. The 58-floor apartment block is managed by Kempinski Hotelier, a German operator that is more than 100 years old, and is very experienced at managing old historic buildings such as hotels that cater to serving heads of state and celebrities. Kempinski Residences offer several types of apartments, from two- to three-bedroom units. The smaller unit is 123 square meters in area while the larger is 261 square meters. Prices start from Rp 1.7 billion. The aforementioned apartments are indeed intended for the high-income segment, but that does not mean that developers have forgotten about those with less to invest as this segment consists of far more numerous customers. Downtown apartments, whether high-end or low-cost ones, are indeed in high demand because traffic jams affect everyone. Currently developers are offering more choices, such studio apartments. Many of these sell for less than Rp 100 million each. There are also subsidized apartments, which can be found in various parts of the city. They are subsidized by the government in the form of tax cuts, money advances and low interest rates. The subsidies, however, only apply to apartments selling for a maximum of Rp 144 million. At a price base of Rp 4 million per square meter, developers often build 36-square-meter units in order to get the subsidy. The subsidy, of course, relieves much of a customer's burden. For example, one only has to pay a Rp 21.6 million deposit for a 36-square-meter unit that is priced at Rp 144 million. The subsidy given for the loan interest also makes monthly payments lower. Instead of the normal 11 percent annual rate, a customer pays between 6 and 8.5 percent. So, the monthly payment is between Rp 700,000 and Rp 1.2 million. When the subsidy was introduced, State Minister for Public Housing Muhammad Yusuf Asy`ari made it clear that only low-income families were entitled to the housing, which is why the prerequisites for such purchases are very tight. Many well-known developers are building this type of housing, for example PT Bakrieland Development Tbk, PT Grup Agung Podomoro and PT Perdana Gapuraprima Tbk. Indeed, their reputations are at stake because they have to provide benefits for customers of low-cost apartments while at the same time ensure quality. They also have to provide attractive facilities. The government plans to construct 1,000 towers of subsidized apartments in the country, 50 percent of which will be in Greater Jakarta, 30 percent in Java and 20 percent outside of Java. Many may foresee economic doom and gloom with the looming price increase of fuel, essential commodity prices, etc., all of which will affect the purchasing power of almost everyone. However, one marketing director of a major developer predicted that property sales would not immediately slow down. He referred to the country's situation two years ago when the macro economic condition was not favorable after fuel prices were increased, but the property business continued to boom. He said that the demand for property was still high and would remain so because interest rates were low and it was relatively easy to get a loan. "Next year, due to high inflation, interest rates will go up. The price of building materials will also increase next year. So, this year is the right time to look for or purchase a house or apartment," he said. The writer can be reached at burhanabe@yahoo.com
Developers eye low-cost apartments, houses
The Jakarta Post, Jakarta The Indonesian real estate association (REI) is to construct 86 subsidized low-cost apartment towers, with 600 units per tower, and 120,000 low-cost houses this year for low-income households. "We have already built around 40,000 apartments in 61 apartment towers throughout Jakarta. State-owned Bank Tabungan Negara (BTN) has financed 3,000 units," said Alwi Bagir Mulachela, REI general secretary, Saturday. David Lelij, sales manager of PT Tiara Metropolitan Jaya, subsidiary of major property developer Agung Podomoro Group, said members of the association were committed to providing such facilities at fairly affordable rates. "We want to provide low-income earners an affordable place to live in the heart of the city," he said at the Real Estate Indonesia Expo 2008 opening. David said Agung Podomoro were constructing 6,000 units of subsidized low-cost apartments in Kalibata, South Jakarta. "Demand for low-cost houses is increasing," he said. David welcomed high-income earners to invest in the low-cost apartments. "But buyers who earn more than Rp 4.5 million (US$488) per month will not be eligible for the government subsidy and they will have to pay the tax as well." Under the scheme, the government will subsidize buyers earning less than Rp 4.5 million per month by paying 3 to 9 percent of their interest during a period of up to eight years. The 10 percent tax on units worth a maximum of Rp 144 million ($15,616) will be lifted. For houses, the government will provide a subsidy of Rp 7.5 million, Rp 10 million and Rp 12.5 million, depending on buyers' income levels. The government is aiming to have 1,000 low-cost apartments built by 2011 throughout the country and at least 1.35 million low-cost houses during the 2004-2009 period to accommodate the needs of low-income earners. The government supports developers by simplifying permit requirements to develop low-cost houses and apartments. Besides Agung Podomoro Group, Gapura Prima Group, Artha Graha Group and Bakrieland Development are also taking part in the program. (rff)
More expatriate families living in serviced
apartments
With the rising number of expatriate families eager to live in serviced apartments, more serviced apartments have been designed to meet the market demand in Jakarta. Puri Casablanca Apartment, for instance, said that it offered not only more spacious rooms but also supporting facilities that are best suited to expatriate families. Puri Casablanca said that its units measured 93 sqm up to 201 sqm, with family facilities including children's playground and lagoon-style swimming pool. "Our children's playground is equipped with an America-made Little Lake," the apartment management said in a statement. Other facilities include a children's pool, an international preschool, a barbecue area, a spacious park, Jacuzzi, 800-meter jogging track, fully equipped fitness center and mini golf range. "The average guest is foreign, staying on an average of one month to six years," it said.--JP
Jakarta's future buildings to be up close and
personal
Tifa Asrianti, The Jakarta Post, Jakarta Multistory, compact buildings are the future of construction in Jakarta, as the administration seeks to make green zones cover 30 percent of the city area, as required by the Spatial Planning Law, officials say. Nana Apriyana, head of spatial planning and land education and information at the National Planning Board, said all housing in urban areas should be built upward to ensure optimum land usage. "Landed residential buildings should be put in the suburbs and supported with a good transportation system," he said. Green zones currently make up 9.6 percent of Jakarta's total area, and the Jakarta administration plans to increase the amount to 13 percent by 2010. But even then the administration will have a long way to go -- under the law, green zones must account for 30 percent of every city, municipality and regency. Budi Situmorang, head of national and island spatial planning policy at the Public Works Ministry, said Jakarta would face difficulties in creating green zones in its already developed urban areas. He said the 30 percent target consisted of 20 percent public green zones and 10 percent private green zones, meaning the regulation also applied to the private sector. "The Jakarta administration can 'green up' using simple technology, such as creeper plants on concrete columns and potted plants, or go high tech with green rooftops and sky terraces. We'll count those as green zones," Budi said. He said the central government would give the Jakarta administration until 2009 to revise its target. Yayat Supriyatna, an urban planning expert at Trisakti University, said it would be impossible for Jakarta to reach the 30 percent target on its own because 90 percent of the city's area had already been built. "The Jakarta administration would have to provide a lot of money to acquire the land, because 1 percent of the Jakarta area is 6.5 hectares and the price per square meter of land is high," he said. Budi said there would be a presidential decree in August regulating the spatial planning of Jakarta and its outlying areas. "The decree will regulate spatial planning in Jakarta, Bogor, Depok, Bekasi, Tangerang, Puncak and Cianjur," he said. The government amended the 1992 Spatial Planning Law in 2007 because of Indonesia's susceptibility to natural disasters. The new law is expected to regulate land use to reduce environmental impact.
Some of the new rules in the 2007
Spatial Planning Law Source: Spatial Planning Law
Land problems leave housing projects in limbo:
Govt
The Jakarta Post, Jakarta Land acquisition problems are threatening the government's ambitious five-year project to secure 1.3 million subsidized housing units through the construction of apartments and houses in cities. Expensive land prices provoked by legal battles over land acquisitions have impeded the construction of the projects, State Minister of Public Housing Yusuf Asy'ari said Monday. "It will be difficult to realize the planned target because of the expensive lands needed to be cleared by the government," said Yusuf during a meeting with the House of Representatives' Commission V overseeing housing, public works and transportation. He said the Ministry of Finance and the Ministry of Public Works should revise several regulations related to the taxable value of property (NJOP), which is used as a benchmark to determine land value. "We have to come up with a decision immediately, otherwise the projects could be delayed," he said. Numerous infrastructure and public housing projects in Indonesia have run aground due to land acquisition problems, while government efforts to resolve the problems have come up short. According to the Ministry of Finance, the government is currently financing the construction of 75 towers consisting of 45,000 units in Greater Jakarta, as well as 44 units of houses to be rented in densely-populated regions. The government targets 1,000 towers to be built by 2011. "We have provided Rp 468.3 billion (US$50.3 million) to construct the towers and rented houses in the first half of this year," Yusuf said, adding that his office had allocated Rp 760 billion for the second half of the year. The country's major property developers have recently voiced their reluctance to participate in the projects unless the government resolves land acquisition problems and provides tax incentives as promised earlier by the Finance Ministry. The public apartments and housing projects were launched in 2006 as part of a project initiated by the Susilo Bambang Yudhoyono administration to help resolve housing problems in cities. During the hearing, Yusuf spoke of difficulties in securing electricity and water supply for new apartments and houses due to complicated bureaucracy within related ministries. Yusuf said many people from outside Java were reluctant to buy subsidized apartments or houses because they often faced blackouts and water shortages. "However, we will keep on building new towers and houses because by the time they are completed, the (electricity and water) supply problems will have been solved, and people will be able to move in," he said. Low-income people are also facing difficulties in trying to buy the apartments as they can not afford down payments required by banks to secure mortgages. "Amid a period of declining public purchasing power, there should be certain regulations passed by the related agencies to help low-income people easily get mortgages," said Yusuf, who is also a senior member of the Justice and Prosperous Party (PKS). (ewd)
'Government
must monitor housing project'
The Jakarta Post, Jakarta Experts say tough monitoring is necessary to control the implementation of numerous low-cost apartment projects in the city. Benjamin Ginting, from the Indonesian Property Study Center, said providing decent residences for low and middle-income earners required a monitoring body for support and to ensure all targets were met. "So the most important thing is that the program has begun. We must now support it. Whether the 1000-tower target will be achieved or not is an issue we can address at a later stage," he said. He doubted the target to significantly improve the lives of the poor and the city's productivity could be met by merely building more apartments in the city. "The government must choose one of those two targets, because removing illegal houses in slum areas and increasing productivity are two different issues that need different approaches," he said. Benjamin said the target to increase productivity was more likely to be met than the target to significantly reduce poverty because low-cost apartments in the middle of the city might reduce traffic jams. Alleviating poverty, he said, was a much more complex task. "It is almost impossible for people who live in slum areas to afford the cost of living in low-cost apartments, which is almost the same as regular apartments. Living in a high-rise building is more expensive than living in a house," he said. The facilities offered in the apartment blocks are unaffordable for the poor. Tap water and electricity will cost the same amount in the low-cost apartments as they do in other apartments. He urged the government to focus on helping commuters find accommodation closer to their workplaces, rather than reallocating residents from slum areas. He said government subsidies were insignificant compared to the private sector's role, which involved planning and selling the units. He said because the government had such a small role in the project it was unable to control how it was being run. "They are only focusing on providing subsidies, while there are actually other things that they could do, like prepare the infrastructure for the low-cost apartments, especially in areas far from the city center," he said. Urban planning expert Yayat Supriatna of Trisakti University said areas on the city's periphery were more feasible for the development of low-cost apartments because land in the middle of the city was more difficult to purchase. "Developing high-rise apartment buildings is the only choice for Jakarta to overcome its housing problem. But to develop low-cost apartments in the city center is very difficult because of the expensive land prices," he said. He said given the apartments were best located outside the city center, transportation would then be a problem. The integration between the 1000-tower program and the program to build comprehensive city infrastructure, he said, was important because both programs could support each other to work effectively. "The integration is important to persuade more low and middle-income earners to buy the apartments that have already been built in Jakarta's outskirts. So people who don't have private vehicles can still buy them," he said. The current development of low-cost apartments is not yet integrated with other development programs involving infrastructure, transportation, green areas river embankments, he said. (uwi)
Urban development project underway
As part of the 2007-2011 Strategic Policy of Urban Apartment Developments, five projects are now underway in the city, including Menara Cawang in East Jakarta, City Park in Cengkareng and Kebagusan City in South Jakarta. The development project came about after the failure of the Indonesian government's 2003 National Development of One Million Houses program, which aimed to provide low and middle-income earners with accommodation closer to their workplaces and avoid the spread of slum areas in big cities. The 2007-2011 project is intended as a guideline for all stakeholders involved in the provision of the low-cost apartments. The purpose of the program is to develop 1,000 tower buildings to provide 350,000 low-cost apartments in cities with more than 1.5 million residents. The project has two objectives in developing the low-cost apartments: to improve the quality of life for low and middle-income earners, as well as to improve the efficiency of city infrastructure in order to increase economic productivity. The program prioritizes cities with growing slum areas, like Medan, Batam, Palembang and Greater Jakarta. The program attempts to improve accommodation supply, including simplifying the land procurement mechanism in terms of land liberation and certification, reducing authorization fees and taxes, and developing facilities needed by areas where the apartments will be built. For those who buy the apartments the value-added tax will be lifted, a ceiling price will be imposed and 2.5 percent of the purchase will be government-subsidized. According to the policy, the total funds needed to implement the five-year program is Rp 56.88 trillion (US$6.1 billion). The government plans to acquire Rp 6.15 trillion of the funds from the state and regional budgets and the rest, Rp 50.73 trillion, will come from the private sector. Around Rp 4.3 trillion is allocated to subsidizing apartment purchases, while Rp 1.7 trillion is allocated to the development of facilities and infrastructure in the apartments' areas. The rest, Rp 150 billion, will be used for creating a conducive climate for the apartments. Some apartments will be sold and others will be rented out. The rented apartments are for those who live in areas like river embankments and under elevated roads. During the program's first year, several government-owned plots of lands were used for the project, such as land owned by state railway company PT Kereta Api in Bukit Duri, South Jakarta; the State Logistics Agency in Marunda and Kelapa Gading, North Jakarta; and state housing company PT Perumnas in Pulogebang and Pulogadung, East Jakarta. The program will also utilize private land in Cawang and Cipayung, East Jakarta; Kebagusan, South Jakarta; and Cengkareng, West Jakarta. In order to make sure the subsidized apartments meet the program's target, the government has created a purchasing scheme based on buyers' incomes. People who are eligible for purchasing the apartments are those with monthly incomes between Rp 1.2 million and Rp 4.5 million, while the apartment prices range from Rp 75 million to Rp 144 million.(JP/uwi)
FeNew Tax Law Will Mean More Disputes: Lawyers The Finance Ministry’s tax directorate may face a soaring number of tax disputes in 2009 as the number of taxpayers grows rapidly from the last financial year and a new tax law is imposed, the Tax Lawyers Association warned on Thursday. “In 2008 alone, the tax court had to deal with around 2500 cases,” said Juniver Girsang, chief of the Tax Lawyers Association, predicting that the number of cases was likely to double due to a new tax law which came into effect in January. Under the new law, taxpayers can challenge in court the tax amount charged to them without handing over any money first. The previous tax law obliged taxpayers to pay 50 percent of the amount assessed by the tax office before they were entitled to challenge the figure in court. Juniver said that most taxpayers and tax officials did not completely understand tax laws. “Taxpayers usually focus on the tax calculation and are not aware of its legal implications,” he said. “Tax officers also make mistakes that could harm taxpayers.” He said tax regulations were also far from perfect, and were even sometimes against the law. For example, taxpayers could be sent to jail for not paying tax. Yet, he added, they were also required to pay administrative sanctions for the same tax. “This is against the legal principal ne bis in idem [not twice for the same], because there are two punishments imposed upon one mistake,” he said. Anshari Ritonga, an tax law expert, said taxpayers would play a significant role in ensuring tax collection succeeded, because of Indonesia’s self-assessment system. Indonesian taxpayers pay tax by self assessment which means they list, value and report their taxable wealth by themselves. “In the case of a tax dispute, taxpayers could turn to tax lawyers to bridge their differences with the tax office,” he said.
Tax office to issue regulation on tax incentive within days
The Jakarta Post, Jakarta The tax office is moving ahead with its plan to provide incentives for companies that cover, partly or entirely, their workers' individual tax liabilities, and could issue a ministerial decree on the matter as early as this week. Unlike in many countries, most companies in Indonesia cover their workers' income tax. Darmin Nasution, the Finance Ministry's director general for taxation, said the regulation regarding the incentives, which was formulated to ease the burden on companies amid the ongoing financial crisis, would be introduced on Feb. 10 at the latest. "We are running simulations to calculate tax incentives needed in each sector so that we know the proper allocations," Darmin said following a hearing with the House of Representatives' Commission XI on financial affairs. The incentive will form part of the government's fiscal stimulus plan totaling Rp 71.3 trillion (US$6.3 billion) launched in anticipation of the impacts of the deepening global economic crisis. The Finance Ministry said the allocation for the incentive would amount to Rp 6.5 trillion. Not all businesses will receive the incentive. Businesses with good records of tax payment, and which are labor and export oriented will be more likely to receive the incentives. "I cannot tell which sectors will receive the incentive just yet. We are still discussing it," Darmin said. The Indonesian Chamber of Commerce and Industry recently suggested the government does not provide such an incentive to labor-intensive industries as most of the companies' employees there were low-wage workers, whose salaries were mostly below the taxable income threshold. "On the other hand, if the incentive is aimed at the middle to upper workers, it will not do any good either especially if the companies use the extra money gained from tax cuts to buy imported goods," University of Gajahmada economist Sri Adiningsih said Wednesday. The country's imports rose sharply last year to $128 billion from $74 billion in the previous year, cutting the trade surplus by 80 percent to $8 billion from $40 billion in 2007. Sri said that other than giving incentives to urge people to consume, the government should also establish an effective way to promote domestic product consumption to cushion the impacts of weakening global trade. "I am not saying that we should adopt protectionist policies, but there are other things the government can do to promote domestic products," she said. "The government can start cutting out the hassle in bureaucratic policies and improving on infrastructure to reduce the cost of production and improve the quality of the domestic products.". (hdt)
Tax rules still unclear for mixed marriages
The Jakarta Post, JAKARTA The hopes of some mixed-marriage couples to obtain answers regarding taxation policies have gone up in smoke. A seminar on taxation held Saturday concluded with more questions than answers as couplesincluding Indonesian men married to foreign women and Indonesian woman married to foreign mendiscovered that their marriages hardly entered the tax office's mind. "My husband works as a diplomat. He does not have a taxpayer identification card (NPWP)," said Ayu Castermans, a participant at the seminar organized by the Mixed Marriage Community (KPC Melati) in Kuningan, South Jakarta. A panelist at the seminar said Ayu did not need an NPWP because she was a housewife and her husband had diplomatic status. The panelist, however, added that another regulation implied that Ayu needed an NPWP because there was a pre-marital agreement between the couple separating the ownership status of the family's assets, in this case the property. "I am worried that one day, when tax officers check my asset report, they will consider me to be violating the law because I have no NPWP but have an asset under my name." "They will wonder where the money came from. And even though I will say it was from my husband, how will I prove it to them?" Ayu was not the only one confused. Another asked a hypothetical case about her non-Indonesian husband, who now has an NPWP: What happens if he leaves the country for good but after his retirement returns as a tourist? "Should we report the tax, then?" she asked. Formation Management Institute tax division head Aminarso said he could not immediately provide answers to all questions. For Indonesian couples, the tax policy is simpler. A family is regarded as one economic entity with father as the head of family. He is the one who must have an NPWP. The policy still applies if a husband is unemployed. The wife must pay for the family's tax obligations, but the NPWP will still be under the husband's name. But things get more confusing when it comes to mixed-marriage couples with issues such as domicile, premarital agreements and property ownership. Under the government's program, dubbed the Sunset Policy, all unregistered tax payers must present their tax report to the tax office within a year and they must have the NPWP by December. The government, however, has extended the deadline until the end of February, allowing more unregistered tax payers to hand in their reports. Cecilia Ronnevik, who currently lives in Norway, questioned the Indonesian Embassy in Oslo. She said she did not receive information regardingPolicy" from the tax office. However, Aminarso said he could not immediately give clarification on the issue. (hdt)
Incentive set for firms that pay workers' income taxes
Mustaqim Adamrah, THE JAKARTA POST, JAKARTA A planned regulation under which the government will take over workers' tax liabilities normally paid by firms, will be issued "within weeks", says the tax office. Darmin Nasution, the Finance Ministry's director general for taxation, said late Friday the regulation would come in the form of a ministerial decree and would only apply to firms operating in sectors hit the hardest by the global economic slowdown. incentive will be available to companies in certain sectors hit hard by the slowdown. We have been in discussions with relevant institutions over this, including the Office of the Coordinating Minister for the Economy. We expect to finalize the regulation within weeks," Darmin said, adding the eligible companies would only enjoy waived tax liabilities for middle- to lower-ranking workers. This means eligible companies must still pay the tax liabilities for employees at the level of manager and above, he added. On Thursday, Finance Minister Sri Mulyani Indrawati said that to help ease the burden on the private sector amid the weakening economy and to avoid layoffs, the government would take over workers' tax liabilities normally paid by companies. In Indonesia, unlike many other countries, most companies subsidize the income tax liabilities of their workers, creating additional costs that would normally be borne by the workers. "We'll choose [which companies are eligible for income tax incentives], based on the impact of the [global economic] crisis, companies' track records and how urgently these companies [need help] in facing pressure resulting from the weakening global demand," Mulyani reiterated the plan at the State Palace on Friday. She added the government expected the incentive would encourage the corporate sector to keep workers and avoid dismissals. Darmin said negotiations would continue and center mainly on the criteria to select eligible industries and work out the best mechanisms for implementing the incentive. The incentive, if materialized, comes in addition to the government's plans to spend Rp 27.5 trillion ($2.49 billion) this year in a fiscal stimulus package for the real sector to keep the economic wheels moving despite the tough challenges. The details of the total pledged stimulus package remain vague because the government has yet to decide on priority sectors and allocation of funds for them, despite clear signs of worsening conditions both internationally and at home. With all these incentives, the government hopes to book economic growth of between 4.5 and 5.5 percent - a fairly respectable figure at a time when many others are suffering from a recession. Succeeding in meeting the target means the government can keep unemployment and poverty rates fairly in check. The government has gone all-out to try to protect the economy from the impact of the global slowdown, although critics say the moves are driven more by political purposes ahead of the upcoming legislative and presidential elections. However, for Indonesia's Chambers of Commerce and Industry (Kadin), the government's plans are still laudable, regardless of the motives. Hariyadi B. Sukamdani, Kadin vice chairman for monetary, fiscal and public policy affairs, said the plan to take over companies' burdens in covering workers' income tax liabilities would be good for companies and ultimately workers. "It's definitely a good plan. Eventually workers will also enjoy the benefits," Hariyadi told The Jakarta Post on Friday. (hwa, dis)
World Bank gives loan to RI to improve tax systems
The Jakarta Post, Jakarta The World Bank, one of the country's major donors, has approved a US$110 million loan to the Indonesian government to help it improve taxation systems. The soft loan was approved and announced from Washington last week, a media statement said. "Indonesia has already embarked on a major effort to reform its system of collecting tax revenues, most notably by revamping the directorate general of taxation, introducing modern compliance management systems, and passing the Tax Procedures Law in 2008," the Bank's country director for Indonesia, Joachim von Amsberg said in the statement. The Finance Ministry's directorate general of taxation performed surprisingly well last year, persuading over 3 million people to register for their tax number (NPWP) and making a surplus of Rp 37 trillion in tax revenues, or 106 percent more than the planned state budget. The tax office succeeded by launching massive tax campaigns and offering numerous incentives to people with an NPWP, including exemption from the Rp 2.5 million (US$227) exit tax for overseas travel and amnesty from administrative fines for tax return adjustments for 2007 and earlier. It began its tax reform efforts in 2001, with a strategy aimed at: promoting voluntary compliance among taxpayers; increasing the efficiency of administration; and restoring taxpayers' confidence in the fairness and integrity of tax administration. The office also runs other programs, such as taking over workers' tax liabilities for companies hit hard by the crisis in order to stimulate economic growth, the Finance Ministry's directorate general for taxation Darmin Nasution said. According to von Amsberg, the $110 million loan aims to help the office embark on an even more progressive reform in tax administration through a project called the Project for Indonesian Tax Administration Reform (PINTAR). "Through PINTAR, the World Bank sets out to complement this effort by helping the Indonesian Government expand tax bases, both in terms of increasing the number of tax payers and of transactions coming into the tax system, which would in turn help generate more non oil and gas tax revenue," he said. The PINTAR program will help increase the directorate general's tax efficiency and capacity, he added, through improved administrative systems, advanced training of human resources and better management. "Through strengthened staff capacity, integrity standards and a more service-oriented approach, PINTAR will enable better taxpayer services reducing compliance costs for the private sector," said World Bank senior public sector specialist and project team leader, Jens Kromann Kristensen. He added a modern integrated IT system will also help raise productivity and facilitate information exchange across the Directorate General of Taxation. (dis)
Exit taxes, tourism
The increase in the exit tax is a big joke. Where is this money going to, is the paid tax being accounted for? On several occasions when traveling abroad I have been approached by officials at the airport who told me to pay them only Rp 500,000 (US$45) and I would then be escorted by an official and bypass Immigration officials to board my flight. I have always refused to do this, figuring that, due to unforeseen circumstances, I still might have to pay the required Rp 1,000,000 exit tax, so I could end up paying Rp 1,500,000. I also witnessed how many passengers traveling abroad took this opportunity to pay only the arranged Rp 500,000. This means the government is losing billions per day which airport officials are pocketing. Who is the government trying to fool? They should abolish this exit tax altogether because officials at the airport are smarter than the government. Luring tourists into this country with the Visit Indonesia 2008 slogan has failed. As Teuku Agam noted in his letter to The Jakarta Post on Dec. 27, 2008, tourists are being scared away by the ridiculous porn bill. The government should realize that the majority of farmers, who start standing knee-deep in their paddy mud at 5 a.m. each morning, consume alcohol to keep warm. Countless fishermen who stay out on their boats for two days or more also drink alcohol to keep warm at night. These people would never survive without their alcohol. Is the government now prohibiting this alcoholic beverage too? Foreign tourists drink wine, scotch, gin, vodka, and the sort because it is part of their culture. We cannot forbid this just as they cannot stop us from eating rice and noodles and smoking our kretek (clove cigarettes) when we visit their countries. Wake up President Yudhoyono, succumbing to a group of ridiculous people with ridiculous ideas only causes this country to lose billions in foreign currency which tourists could be bringing into this country. Many are now flocking to Malaysia (predominantly Muslim but without ridiculous laws). Instead of imposing ridiculous laws, start improving infrastructure and airport facilities. The airport toilets all over Indonesia are an absolute disgrace. I just returned from Manado where the toilet facilities are a total disaster. Gov. Sarundayang, do something about this, an international conference on oceans is being held in your town soon.
LYNNA
VAN DER ZEE-OEHMKE
The airport exit tax
I think the government should increase the exit tax even more. There is nothing wrong with it. People that pay tax do not need to worry and people that do not pay tax should at least pay tax when going oversees. In my view, anyone that can afford to travel is "wealthy" enough to pay the Rp 2.5 million. It should just be taken into account when booking a ticket. For the Indonesian government, it means an increase in income, directly and otherwise indirectly, as a result of more registrations for obtaining a tax number. On the other hand, people might be encouraged to spend holidays and subsequently more money, inside the country of Indonesia, hence boosting the local economy. Don't complain, no need to travel abroad when you're already living in such a nice place where so many islands are waiting to be explored.
TIM
BEEKELAAR
Airport exit tax
I agree with the policy because it will force people to abide by tax regulations.
BUDIYONO FAMILA It looks like the start of another poorly thought out and implemented rule that adds to the nightmare of traveling, not only to but now also from Indonesia.
Do the
boys who make these rules also stand in line to show their tax documents?
Ridiculous! I truly support the new tax regulation in a bid to net more new taxpayers that could increase state income. As it is known at present that only 10 million taxpayers out of 230 million people have registered.
Therefore, the government needs to encourage as people as possible, mainly
the middle- and upper-income group, to registered for a NPWP. ABDUL RAHIM
Did
anyone tell the director general of tax that foreigners working here do not
have a family card? Neither do male foreigners married to Indonesians. So
how will spouses be able to leave the country without saying this egregious
levy?
Poor
decision -- The tax office is mixing travel and tax! Wrong place to
implement new tax rules! If cash was in true value, the exit tax should be
Rp 10 million.
To
make payment easier and for clearer accounting, I really hope they can
accept payment by debit and credit cards. Am I hoping for too much? It is
2009 after all. Thank god, the new exit tax tied with NPWP will be valid for only two years. And believe me, the new system will lead to mess and corruption at exit points.
However, I am sure the government will have control staff, as happened when
officers started checking fiscal payments in exit ports.
I
agree with the increase of the airport exit tax.
It's a
good policy to encourage citizens to have NPWP, but the government should
make regular evaluation of its implementation.
I
agree with the increase of the airport exit tax. Don't be hopeless.
Exit
tax should have never existed in the first place. How can you charge someone
for leaving your own home/country for this matter?
Increasing airport exit tax for adult Indonesian citizens who have no NPWP
is logical to compensate the taxes they have not paid. A good citizen will
voluntarily register himself to pay taxes for his own good.
Insane, ludicrous, ridiculous, irrational! This 250 percent increase
translates into the great depression a la Indonesia.
That's
too much, the government is grabbing people's money to meet their tax
target.
I
would like to suggest retired (people over 60) without NPWP who do not work
be exempt from paying airport exit tax, too.
Migrant workers should be exempt from this ridiculous tax, which should
never have existed in the first place!
Since
under 21s are exempt from paying exit tax, what about of those 60 and above
(retirees)? Do they enjoy the same privilege?
An
airport tax of Rp 2.5 million is bizarre. People who don't have a job don't
have a tax number! The partner can have a job so why pay airport tax for
him/her?
Taxpayers to assert rights
The number of personal income taxpayers who will file their annual tax returns before the end of March (the deadline for the 2008 income tax payments) will most likely exceed 10 million. About 8 million of them will be first-time filers, individuals who voluntarily registered themselves as taxpayers to take advantage of the benefits granted to citizens with taxpayer identification cards (NPWP). The dramatic increase in the number of registered income taxpayers is the result of the massive tax campaign last year and the great incentives offered to people with an NPWP, including exemption from the Rp 2.5 million (US$227) exit tax for overseas travel and amnesty from administrative fines for tax return adjustments for 2007 and earlier. At present, those without an NPWP will find it almost impossible to make business transactions, including buying motorcycles, cars, homes or jewelry worth more than Rp 100 million. Another advantage is that those with an NPWP are subject to income tax rates much lower than those imposed on unregistered taxpayers. Certainly the steep increase in the number of people now falling under the national income tax net will cause not only administrative consequences, with the tax office suddenly having to process such a huge number of tax return forms. But this development will also exert a political impact because more and more citizens will see themselves not merely as common people or the "governed ones", but as taxpayers who pay the government and its employees and who will most likely demand stronger influence in decision making. Administratively, the workload of the taxation directorate general will increase sharply as newly registered taxpayers still need to be encouraged to comply voluntarily with their tax obligations by regularly filing their tax returns. Taxpayers should be educated to understand that filing tax returns is neither complex nor costly. However, voluntary tax compliance also will increase if the cost of tax evasion and nonfiling of tax returns is very high. People will fulfill their tax obligations if they know their chances of being caught by tax officials and auditors is very big. It is comforting to learn the tax office is fully prepared with a much bigger administrative capacity to serve a large number of taxpayers and has developed a strong law-enforcement system. But as empirical evidence from developed countries and emerging economies shows, there is a close relationship between taxation and democracy. Put another way, there is no taxation without representation, because citizens will demand something in return for increased taxation. This "something" could be better public services or demands for greater influence in political decisions. Their democratic right provides them access to information on the amount of resources going to which programs in which areas. The government's dependence on tax rupiah from the people (earned income) fosters interaction between the state and society, making the government more responsible to its citizens. Moreover, the interaction tends to strengthen demand for improved accountability of government institutions. Hence state dependence on local taxation will raise accountability among politicians and decision makers. The rationale is that as long as the government is still perceived to be quite lax in combating corruption, thereby letting taxpayer money go to waste, there will be no significant improvement in the attitude and motivation of the public to voluntarily pay their taxes. Hence voluntary tax compliance is also influenced by the taxpayers' perception of the integrity of tax officers and the government's credibility with regards to governance practices. Otherwise, taxpayers might simply ask themselves, "Why do we have to pay taxes if most of the money eventually ends up in the pockets of corrupt officials?"
Airport
exit taxes
Your comments on airport exit taxes which as of Jan. 1 increased to Rp 2.5 million (US$227) per person -- except for those with a tax number (NPWP) who are now exempt. Just ridiculous! Now, I will have to stop some of my business travels to other countries, and of course I won't be able to take my family. I guess that's the goal of the Indonesian government, to stop people from leaving. I feel bad for my Indonesian friends for sure.
JIM S. I am a young Iranian executive and just finished reading an article in The Jakarta Post. I'd like to say that virtually all governments of the world encourage their young people or young generation to travel abroad not only seeking jobs but knowledge and ideas which will one day be brought home for the benefit of the people and the country. But the decision of your government to increase the exit tax by more than double will only make the younger generation and young business people more restricted to travel and know less about what is going on outside their home country. How can your country improve and prosper if you have such regulations and laws? Honestly, I have been to your country a few times and I find there are many laws and regulations so very stupid and without common sense.
I
believe such laws and regulations only benefit the politicians and filthy
rich business people. May God forgive your political leaders that are more
interested in their personal wealth than the welfare of ordinary citizens.
ALI KHARAZI I am from Italy and have been traveling regularly in this region. I noticed that the Malaysian, Singaporean and Thai governments have encouraged their citizens to go abroad and earn a living without any form of restrictions unless of course one has a criminal record. The decision made by your government to increase exit taxes is a very immature decision. To be more simple, a very stupid move indeed!
This
shows your politicians make decisions based on emotions rather than common
sense. The whole world is laughing at your government with its decisions
that do not help the people, especially the poor. DAMIJAN BASIN
I
think it is not fair to increase it, especially for foreigners who don't
have a tax number. How are you going to promote Indonesia if the tax alone
is that high? LINDA
This
airport tax is not fair for a retired KITAS holders who no longer earn a
salary. They are entitled to an NPWP. The retired KITAS holders should be
exempt from the tax. BERNARD WILLETTE The increase is OK with several conditions. First, if the government has a system to verify that the NPWP numbers are not faked. Second, if it guarantees that it would not become a new "product" that can be used by immigration and airport officials to get extra cash. And third, if transparency is no longer questioned from the start to the end of the process, the immigration office should present a corner box in major media with an easy-to-digest summary and statistics, on a weekly basis.
Without considering the factors, the whole effort will become an interesting
case for officers of the Corruption Eradication Commission in the future --
but I would prefer to see anticipative measures. JO NAVARRO Exit taxes from Rp 1 million to Rp 2.5 million is not an increase, but more than double.
Many
poor Indonesians still need to go abroad to find jobs, so don't burden them
with such taxes. ELRIO SYAMSUMAR
Authority and responsibility of related tax officers should be fully
described. SUWARSO
Why is
there no mention of tax relief for retired people. They worked and paid
their taxes, and now live on their pensions. They also deserve some
consideration. JOSEPH This new method and pricing for exit taxes is a good decision of the government to punish non-tax payers. It would certainly encourage more and more people to start paying tax. This method however needs proper planning and initialization to save time as much as possible for those traveling passengers. They have to make it user friendly too. For those paying the fiscal they could use ATMs to transfer money directly, instead of filling in forms and waiting in long queues to get paid stamps.
For
those without credit cards, they could carry on using the current method.
They could also issue smart cards for current tax payers which would allow
them to just swipe and go through. ARUL VERMAN
The increase of exit tax
Your comments on airport exit taxes which as of Jan. 1 increased to Rp 2.5 million (US$227) per person -- except for those with a tax number (NPWP) who are now exempt. I see there is still a gap in the information about the exit taxes. What about expatriates who are living in Indonesia with a retirement visa? We are allowed to stay up to a year without leaving the country, do not have any income from Indonesia, and so cannot be registered tax payers.
So far
we have had to pay Rp 1 million if we exit. To pay Rp 2.5 million seems
excessive. What is the Indonesian government trying to do with this country? They stop tourists coming with that pornography law and now stop people going out by raising the tax!! What about for all the housewives that have no NPWP? Do they have to pay that ridiculous amount to visit their kids who are studying overseas or even when they take their kids for holiday??
This
also makes me wonder, do the President and Vice President's wives also have
to pay this amount when they go on holiday overseas?? I have lived in Indonesia for around eight years now, and started looking at The Jakarta Post around four years ago. This new airport exit tax fee law is one of many stupid laws in this country.
It
will help only the rich and make sure that the poor will stay poor, but that
is the Indonesian culture. The exit tax which was introduced by a very "creative" dictator many years ago, still remains unchallenged in a democracy. It was even increased by 150 percent, as of Jan. 1! It reminds us of the dark Middle Ages when robber barons and street robbers took whatever they could -- not a modern society where human beings (rich or poor) are free to leave their country whenever they want. I pay a lot for my KITAS every year, a lot for an exit-re-entry permit -- why must I and my Indonesian wife (who has no income at all) pay another Rp 2.5 million when we want to visit my family in Europe?! Was it obvious where the billions of rupiah drained away to during the aforementioned dictatorship? It proved to me -- as a former lecturer of economics -- that it is impossible to find any exit tax item in the state budgets or annual balances over the last few years. If you go to www.pajak.go.id you will find heart-breaking appeals to register for a Tax Number (NPWP), helping to get out of the global economic crisis which also burdens Indonesia. They promise, for those who can show an NPWP when leaving the country, they will be exempted from paying the exit tax. We will soon see if this is just another of umpteenth broken promise.
Facit
and pious hope for 2009: Be more inventive in erasing corruption than
squeezing your people. It seems to me this is a good thing. I mean, I disagree with the fiscal tax and believe it should be abolished, but this is the next best thing. In theory, only those who travel abroad and are not registered tax payers will have to pay in increased fiscal. If I understand correctly, registered tax payers who are residents in Indonesia will no longer pay fiscal tax. And, in 2011 the tax will be abolished altogether. (I'll believe it when I see it!!) But for now, if you are a legal income tax payer, the fiscal is done. As for Indonesians residing abroad, if they have their overseas address recorded in their passport at the Indonesian Embassy in the country where they are working/living they get four fiscal-free trips every calendar year.
This
has already been true for many years. I feel sorry for maids working abroad
who do not know this -- their puny salaries wasted on fiscal. It comes down
to a few things: Will Indonesians pay their tax? Which costs more, fiscal or
income tax? Can an NPWP card be forged?
Will
the Tax Office also exempt citizens between 60 and 70 years of age and
Indonesians who want to do research overseas?
This
new regulation is not clear. Is it only for people without an NPWP? How much
does a person with an NPWP have to pay?
Just
ridiculous! Now, I will have to stop some of my business travels to other
countries, and of course I won't be able to take my family. I guess that's
the goal of the Indonesian government, to stop people from leaving. I feel
bad for my Indonesian friends for sure. I am a young Iranian executive and just finished reading an article in The Jakarta Post. I'd like to say that virtually all governments of the world encourage their young people or young generation to travel abroad not only seeking jobs but knowledge and ideas which will one day be brought home for the benefit of the people and the country. But the decision of your government to increase the exit tax by more than double will only make the younger generation and young business people more restricted to travel and know less about what is going on outside their home country. How can your country improve and prosper if you have such regulations and laws? Honestly, I have been to your country a few times and I find there are many laws and regulations so very stupid and without common sense.
I
believe such laws and regulations only benefit the politicians and filthy
rich business people. May God forgive your political leaders that are more
interested in their personal wealth than the welfare of ordinary citizens. I am from Italy and have been traveling regularly in this region. I noticed that the Malaysian, Singaporean and Thai governments have encouraged their citizens to go abroad and earn a living without any form of restrictions unless of course one has a criminal record. The decision made by your government to increase exit taxes is a very immature decision. To be more simple, a very stupid move indeed!
This
shows your politicians make decisions based on emotions rather than common
sense. The whole world is laughing at your government with its decisions
that do not help the people, especially the poor.
Exit tax rise catches passengers unawares
Indah Setiawati, The Jakarta Post, Denpasar Some passengers at Ngurah Rai Airport in Bali have been caught by surprise by the increase in the fiskal or exit tax for travelers going overseas, unaware of the new policy that exempts registered taxpayers from paying the exit tax. Ritchy, an Australian living in Bali, who planned to depart from the airport the second day the new rules came into effect, appeared astonished to learn that the exit tax had been increased to Rp 2.5 million (US$222). He paid the exit tax without much complaint but was unable to hide his disappointment about not getting enough information about the rise. "I think it's a bit too much. What makes me upset is that there was no written announcement on the rise," he said Friday. Even at the airport, he said, he did not get thorough information about the exemption for registered taxpayers, with the young tax officer on duty mentioning only "NPWP", the initials for the registered taxpayer's number. But Ritchy took note of those four letters with plans to find more information elsewhere. Ritchy was not alone, with a number of people -- mostly foreign nationals -- also taken aback when it came to paying the increased exit tax. The written announcement about the exit tax increase, written in Indonesian and English on two pieces of white paper, simply read, "According to the new regulation UU No. 36/2008 and PP No. 80, rate of fiscal tax Rp 2,500,000". A pile of flyers containing detailed information about the new policy was seen inside the fiscal booth. It turned out the papers were not for the passengers, but for the tax officers. One tax officer, Nyoman Yodie, said his office was planning to hand out flyers with the information but had yet to decide when. He said that although some people had been surprised, none had canceled their trip. "Many Indonesians already knew about the new policy and straightaway showed their NPWP card but a lot of Indonesians who lived abroad did not know about it," he told The Jakarta Post. He said he had received a number of phone calls from hoteliers and expected that travelers would ask for information about the increase. "I don't understand why so many travelers still don't know about it," Yodie said. "The policy was announced a long time ago, wasn't it?" Putu Suwardi, an Indonesian working in a hotel in Australia, said he was not aware of the new policy and hoped the government would exempt passengers from paying the exit tax. The exit tax at airports for people aged 21 years and above has been increased from Rp 1 million to Rp 2.5 million, effective Jan. 1, 2009, to Dec. 31, 2010. The exit tax from sea ports has been raised from Rp 500,000 to Rp 1 million during the same period. From 2011, the exit tax will be scrapped altogether. The increase in the exit tax is part of a government effort to encourage more potential taxpayers to register for a tax number.
Exit tax freed, less red tape?
The 150 percent increase in exit tax fees to Rp 2.5 million (US$210) as of Jan. 1, 2009, Indonesian citizens aged 21 years and older will have to pay each time they fly out of the country-- unless they hold a taxpayer identification number (NPWP) -- has turned out to be a most effective way to net new taxpayers. Across Indonesia, in the few weeks since the government announced the planned tax measure the number of people registering for taxpayer numbers has increased more than tenfold, with up to 100,000 new applications a day. The tax office may have booked more than 10 million new taxpayers this year alone. However, the new measure has yet to pass one crucial test: How easy will it be to verify outbound travellers' tax documents at international terminals, to check if they truly qualify for exemption. According to the directorate general of taxation, travelers must submit a copy of their taxpayer number, a passport and a boarding pass to tax officials at airports or seaports for verification before they can obtain a "free exit tax" sticker for their boarding pass. This means the taxation directorate will need to set up special counters for verification which, if not conducted efficiently and properly, could become a new bureaucratic hassle for travelers hurrying to catch flights. The tax office is well advised to recognize that verification is much more time consuming than the simple exit tax payment system already in place and operated by commercial banks in departure halls. Tax officials should see to it that the verification runs smoothly so travelers are not held up in long queues, potentially causing them to miss flights. The ease and efficiency of this verification will depend on how the tax office manages its workload during peak flows of outbound travelers. Better yet, if the tax office could set up a system allowing travelers to use their taxpayer identification cards as smart cards for seamless verification. But again, registering taxpayers is only the first step in the ongoing drive to broaden the national taxpayer base. The tax office also needs to develop an effective and efficient tax administration and introduce tough law enforcement to minimize tax evasion and tax fraud. If law enforcement remains lax and the institutional capacity of the tax administration is not improved, the massive number of new taxpayer registrations could turn out to be a flop, as happened in a similar campaign in 2005. In 2005, the tax directorate boasted having almost tripled the number of registered taxpayers to more than 10 million individuals, but the number of taxpayers who filed annual tax returns last year remained stagnant, at around 3.7 million as of this year. The concerted tax campaign this year has also registered more than 10 million new taxpayers, but what is the significance of these new registrations unless the number of taxpayers filing annual tax returns increases significantly too?
Tax office gears up to phase out abhorred exit tax
Aditya Suharmoko, The Jakarta Post, Jakarta As the enforcement draws near of a new policy on the much-decried fiskal, or exit tax for travelers going overseas, the tax office says it will do its utmost to spare travelers any inconvenience. On Tuesday, Darmin Nasution, the Finance Ministry's director general of taxation, said his office had set up all the necessary systems at international ports and airports to support the new "free exit tax" policy. Besides performing real-time simulations, the directorate has also prepared directions and pamphlets to guide travelers looking to benefit from the exit tax exemption. "There will be directions for each group wishing to get exit tax exemption, so they won't get confused," Darmin said. All of the country's international gateways will feature a line for each of the three types of tax-exempt travelers -- registered taxpayers, those below 21 years of age, and those with supporting documents. Under the new policy, the exit tax for those aged 21 years and above departing from airports will be raised from Rp 1 million (US$91) to Rp 2.5 million, and for those traveling by sea from Rp 500,000 to Rp 1 million, effective from Jan. 1, 2009, to Dec. 31, 2010. The tax will apply only to those not in any of the three groups. The exit tax will be scrapped entirely by 2011. "After checking in at ports or airports, registered taxpayers will need to validate their tax numbers (NPWP) with the tax office (there), and bring a copy of their NPWP," Darmin said. Family members of registered taxpayers seeking exemption from the exit tax will have to provide a copy of the "family card", he added. Under the new income tax law, people below 21 years of age are exempt from paying the exit tax. The previous law only exempted children below 12 years of age. Those seeking to avoid the tax must register for an NPWP at least three days before departing, to allow the tax office sufficient time to prepare the files needed at the gateways. "We can make the service faster; we're bringing our master file (to the ports and airports), putting our entry there," Darmin said. However, the tax office previously said if the NPWP was rejected by port officials, travelers would have to pay the tax. The new exit tax policy is aimed at encouraging middle- to upper-income residents to pay taxes. At present, only 10 million taxpayers out of the country's total population of 230 million people have been registered by the tax office. The taxpayers include individuals, companies and institutions. Those exempt from paying exit tax directly:
1.
People below 21 years of age Those exempt from paying exit tax, with supporting documents:
1.
Foreign students in Indonesia
Unregistered taxpayers to pay double for exit tax
Aditya Suharmoko, The Jakarta Post, Jakarta The tax office has officially announced an increase in the much-decried fiskal, or exit tax for travelers going overseas, in part to put to rest widespread speculation over the amount of the increase. The exit tax for those aged 21 years and above departing from airports will be raised from Rp 1 million (US$91) to Rp 2.5 million, and for those traveling by sea from Rp 500,000 to Rp 1 million, effective Jan. 1, 2009, to Dec. 31, 2010. However, registered taxpayers will not have to pay a single cent; and starting from 2011, the exit tax will be scrapped altogether, according to the Finance Ministry's directorate general of taxation. Director general Darmin Nasution said the increase in exit tax was part of an effort to get more potential taxpayers to register for a tax number (NPWP). It is proving a smart ruse, with many middle-to-high-income residents flocking to nearby tax offices to get an NPWP to comply with the office's Sunset Policy program that ends on Dec. 31. The program, under which applicants' tax obligations in previous years are written off, has seen people rushing to register themselves. This month alone, the number of people registering for an NPWP was between 50,000 and 100,000 per day, up from about 7,000 people daily in previous months. The exit tax will from now on become an up-front payment for income tax. For instance, an employee whose income tax is Rp 20 million per year and who has traveled abroad twice this year -- paying Rp 1 million in exit tax each time -- will only have to pay Rp 18 million in income tax when filing their tax returns in March 2009. For those not yet registered, the new exit tax of Rp 2.5 million could prove very daunting. Satria Ramadhan, who will go to Bangkok for holidays in early January, said he was glad to have registered for an NPWP. "Otherwise, I would have to pay Rp 2.5 million. I would have definitely canceled my trip if I had to pay such a huge amount." Another traveler, Frederick Tobing, praised the move by the directorate general of taxation. "It's a smart move. Most people, including myself, will rush to register at the tax office, just to avoid paying the exit tax." The directorate general of taxation estimates up to 10 million new taxpayers have registered this year, Darmin said. "I didn't expect the number to be this huge. No one expected to tap 10 million new taxpayers," he said. To get exemption from paying the exit tax, registered taxpayers must submit a copy of their NPWP, passport and boarding pass to tax officials at airports or ports. If the NPWP is declared valid, the officials will put a "free exit tax" sticker on the boarding pass. If it is not valid, travelers will have to pay the exit tax.
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Exit tax from airports for people aged 21 years and above raised from Rp 1
million to Rp 2.5 million.
Businesses seek extension to tax deadline policy
Mustaqim Adamrah and Aditya Suharmoko, The Jakarta Post, Jakarta The Indonesian Chamber of Commerce and Industry (Kadin) has requested the government to postpone a deadline to improve tax filing and undertake tax registration until March next year as businessmen are busier than ever coping with the impact of the global economic slowdown. Kadin chairman Mohamad Suleman Hidayat said Sunday businesses were expecting the deadline to be extended because the global economic downturn had unexpectedly pushed most businessmen to focus on drawing up counter-measures. "We have asked the government to delay the deadline for the sunset policy for another three months because of the (economic) crisis," Hidayat told reporters on the sidelines of a Kadin national meeting. "All businesses are currently thinking of how to handle their own companies (amidst the crisis)." As a result of a new tax law on general procedure late last year, the government has issued rules requiring all taxpayers to honestly report their taxes and comply with the existing regulations. Under the new policy, often referred to as a "sunset policy", the government has also given potential taxpayers time to get a tax registration number and start to comply with the regulations. The government has given one year in which it has waived administrative penalties for previous non-compliance in exchange for accurate tax reporting and registration before starting to impose stiffer sanctions on violators next year. Taxpayers money is the largest single source of income to the state budget, accounting for about 70 percent of state budget revenue. According to the directorate general of taxation, Indonesia only has about 6 million taxpayers in a population of 230 million people. Hidayat argued it was difficult to comply with the sunset policy as it involved lengthy procedures to complete all the filings, including balance sheets. He suggested the government should issue a regulation-in-lieu-of-law to allow a postponement of the sunset policy. In response to Kadin's request, Finance Minister Sri Mulyani Indrawati said the government would study how to make that possible. "Well basically it's impossible for us to extend the registration period as it's already been stipulated in the law," she said. "What is possible is an administrative loophole that may allow such treatment, and I'll try to look into that," she added. Mulyani said the sunset policy had been a success as there were around 200,000 requests for tax file number recorded every day at the moment, as the present deadline expired at the end of the year. The directorate general of taxation has planned stiff measures for those having no tax registration once the sunset period is over, including a new plan to raise overseas travel tax by more than double for those without tax registration numbers.
Incentives for taxpayers
Citizens with taxpayer registration numbers will soon be exempted from the Rp 1 million (US$100) exit tax which all Indonesians, irrespective of age, must pay when they go overseas. A bigger incentive is that children of a father or mother with a taxpayer number will also be exempted from the exit tax if they are under 21 years old. This incentive, included in the new income tax law to be enacted later this year, is one of the measures approved by the government and the House of Representatives to encourage more people to register as income taxpayers. The government seems to have learned lessons from previous tax awareness campaigns that listing new taxpayers without incentives is not an effective way of getting people to regularly file income tax returns. The directorate general of taxes, instead of waiting for people to voluntarily register as taxpayers, conducted a massive, property-based taxpayer registration drive in 2005 by sending taxpayer registration numbers to people in middle and high-income housing complexes in Jakarta and surrounding suburbs. This registration drive brought in more than seven million potential new taxpayers. However only a minority eventually filed annual tax returns due to weak collection systems and the absence of an incentive-disincentive mechanism. Data from the taxation directorate general shows that as of last month, there were six million individuals and entities with taxpayer registration numbers. Yet only 2.4 million regularly filed annual tax returns, of which 1.3 million were personal taxpayers (or 0.5 percent of the whole population) while 1.1 million represented institutional taxpayers (legal entities). The income tax bill currently under discussion at the House of Representatives will establish incentives for individuals and institutions to get taxpayer registration numbers, with disincentives for non-registration. The House and the government have also agreed a provision which would make the income tax burden imposed on trading firms without taxpayer numbers twice as high as the standard rate set for companies with registration numbers. Individuals without taxpayer numbers will also find it increasingly difficult to do transactions. The income tax bill, which is expected to be approved within the next few weeks, will make it impossible for people without taxpayer numbers to buy diamonds or jewellery, or cars worth more than Rp 1 billion and apartments valued at over Rp 2 billion. These incentives and disincentives are designed to encourage individuals of 21 years old or older to get taxpayer registration numbers and to file annual income tax returns. However, taxpayer data will not help broaden the taxpayer base if law enforcement remains lax and the administrative capacity of the tax authorities is not improved. Certainly, newly registered taxpayers still have to be encouraged to voluntarily comply with their tax obligations by filing tax returns. Taxpayers should be educated to understand that filing tax returns is not complex or costly. However, voluntary tax compliance will increase if the cost of tax evasion and of the non-filing of tax returns is higher. People are also more likely to fulfill their tax obligations if they know there is a bigger chance of being caught by tax officials and auditors for tax evasion. This environment requires a stronger law-enforcement system and a higher tax administration capacity to handle taxpayers. The stronger incentives and disincentives will help significantly increase the number of registered income taxpayers next year but this will pose a challenge to the tax directorate general to expand and improve its administrative capacity. Yet more challenging is that tax officials will have to work harder to improve their image because the tax office has long been perceived to be one of the most corrupt public institutions in the country. The government would also be well advised to understand that voluntary tax compliance is influenced by the public perception of how tax receipts are used by the government (good governance).
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Condo units overstocked: sales slump dips furtherAgnes Winarti , The Jakarta Post , Jakarta | Sat, 09/20/2008 11:33 AM | City Second quarter sales of condominiums, both existing and under construction, have plummeted by half compared to first quarter sales, adding precipitously to the sector's downward trend since 2007. In the second quarter report from the commercial division of Coldwell Banker Indonesia, only 439 existing units sold, which is 50.73 percent below previous quarter sales. Meanwhile, condo presales also fell by 30.27 percent. Only 2,626 units sold compared with the previous quarter's 3,766 units sold. "Currently, massive stocks of condo units are on the market whereas demand is standing still or even declining," Coldwell Banker research and analyst manager Dwi Novita Yeni said during a media conference Thursday. A total of 57,466 condo units are available, including 14,833 units in the central business district and 42,633 in secondary locations, such as the Mediterania Marina Residence in North Jakarta and Marbella Kemang Residence in South Jakarta. The property consultant firm reported that in 2007 the condo absorption rate had trended downward by some 50 percent, correlating with recent high inflation and lending rates. According to the report, developers are thus offering special prices and reducing their profit margins to maintain sales levels. Dwi, however, said the increase in interest rates would not significantly discourage the condominium market targeting affluent consumers. The average selling price for a Jakarta condo increased by 5.73 percent in the first quarter and by 4.30 percent more in the second quarter due to rising construction costs. A condo unit in a prime location is currently sold at between Rp 9.8 million (US$1,077) and Rp 22.1 million per square meter. Those in secondary areas are tagged between Rp 5.3 million and Rp 15.5 million psm. Adding to the current heavy overstock, the agency predicted condo developers would place 14,885 new units on the market in the next two years. The ongoing condo construction efforts are usually integrated with office space, retail centers, healthcare and education facilities in the form of mixed-use development projects. Some of them include PT Lippo Karawaci's St. Moritz in West Jakarta, Ciputra Group's Ciputra World in South Jakarta, Pakuwon Group's Kota Kasablanka in South Jakarta and Agung Podomoro's Central Park in West Jakarta. Meanwhile, in a bid to cater to the need for affordable homes for the middle and lower classes, the government has launched the construction of 1,000 towers of subsidized apartments, which are expected to be completed in 2011. An analyst at Coldwell Banker, Makmur Sentosa, said it was unfortunate the subsidized apartments were not reaching the targeted market. "The lack of regulations causes many developers to ignore the requirements customers must meet to purchase subsidized units," he said. Makmur said he found cases where up to five units of subsidized apartments had been purchased by the same party, encouraging investment or speculation. Other buyers had underreported their income statements to fall under the maximum of Rp 4.5 million monthly income to qualify. He also had seen falsified documents attesting to a family's low-income status. "The maximum price for a subsidized apartment unit is Rp 144 million but some developers sell units at a higher price, camouflaging the markup through additional charges and fees." "These violations have become a trend among developers wanting to close on all their apartment units as quickly as possible."
Can Bali and its luxury villa hotel market maintain growth?Djody Trisusanto , Consultant | Fri, 11/07/2008 10:55 AM | Business Bali will achieve a second consecutive record in international tourist arrivals this year, with January to September 2008 arrivals already at 1.5 million, a near 20 percent growth year-on-year. This has been fueled by increased arrivals from Bali's traditional source markets, including Australia, the United States, France and the U.K. as well as solid growth in relatively new markets, including Russia, China and India. Despite being a slow-growing target source, Japan still represents the biggest market for Bali with about 20 percent of the total share. The growth so far in 2008 has been partly due to an increase in the number of carriers authorized to land in Bali, and increased flight frequency. The lifting of the recent U.S. travel warning on Indonesia has also raised travel confidence and increased visitor growth from international markets. Future growth is made possible with the potential resumption of Garuda services to Europe, the proposed expansion of Ngurah Rai Airport and the scheduled opening of a new international airport in Lombok in 2010. Since 1998, Bali has managed to enjoy a positive compounded annual average growth of about 6 percent, weathering setbacks from the Asian financial crisis in 1998, terrorist attacks in 2002 and 2005 and the SARS epidemic in 2003. The key to Bali's market resiliency is its uniqueness. It offers the beauty and harmony of endless cultural attractions, beaches and mountain resorts, culinary experiences, shopping and a wide choice of hospitality services, including luxury villa hotels. The latter concept, which was pioneered by the Oberoi, Amanresorts and the Four Seasons in the early 1990s, has expanded significantly. Bali has since become internationally recognized as the launching pad in Asia for many international luxury brands that include the Ritz Carlton, Bvlgari, Oriental Express, Como Shambhala and more recently the St. Regis. The list grows longer with more luxury brands, such as W Retreat and Spa, Raffles, Banyan Tree and Alila set to open in the near future. These luxury villa hotels offer privacy, luxury, views and personal services featuring detached villas with detailed architectural design, private pools, spacious indoor and outdoor living areas and lavish bathroom facilities. With their superior attributes, luxury villa hotels are able to command significant rates, with an average daily rate (ADR) in the first six months of 2008 of about US$602, up by 20 percent from a year ago. Occupancy, however, has grown at a more moderate pace -- about 56.7 percent during the same review period against 53.2 percent in 2007. This is attributable to the proliferation of private and independent villa developments in Bali over the last two years, which have shared demand segments with luxury villas. Overall, the growth of both ADR and occupancy has lifted the revenue per available room (RevPAR) of the luxury villa hotel market by more than 28 percent on year to $341 in the January to June 2008 period. Despite declines in RevPAR in 2002, 2004 and 2006, over the past ten years, RevPAR has grown positively at more than 7 percent, showing the resilience of this market. The rising number of private and independent villas is not seen as a serious threat to the luxury villa hotel market. Most of these establishments appeal to different market segments, with most looking for a bargain as most branded luxury villa hotels in Bali have continued to increase their rates over the last few years. Adding to this is the intention of the Bali provincial government to increase control over the developments of these private villas. Evidence of improved compliance between the state and developers has come in the force of the new governor's decision to enforce regulations, particularly those affecting Bali's aesthetics and environment. Performance in the remainder of 2008 is likely to remain strong in view of normal cancellation levels and anticipated demand growth during the seasonal year-end holidays. We expect luxury villa hotels to see a record performance in 2008. However, performance in early 2009 may curb as global economies slow and currencies of countries that are traditionally feeders for Bali weaken against the U.S. dollar. The Bali tourism industry has experienced ups and downs and the luxury villa hotel market, similar to property markets, is cyclical. In light of the tighter liquidity and competitive market environment, supply growth over the next few years will likely slow as developers and financiers review the size of their proposed projects, the target markets and the timing/staging of their developments. Estimates of demand for luxury villa hotels will change with new demographics and segments. The cycle will continue, and over the years with improved development regulations, security and infrastructure, we believe this luxury villa market will enjoy long term growth and continue to be resilient. The writer is head of Jones Lang LaSalle Hotels division Property sector heads for slowdownThe Jakarta Post , Jakarta | Wed, 11/05/2008 10:36 AM | Business The property business in Jakarta and surrounding areas is heading for a slowdown next year due to increases in interest rates, inflation, prices of materials and rental costs, according to a property consulting company. "The impacts of the global economic crisis will likely affect the domestic property sector and indications of a slowdown in supply and demand in Jakarta and its surrounding areas have already been noted since October," said head of marketing and communications at PT Procon Indah, Dini Priadi, on Tuesday. On the supply side, she said, high interest rates, inflation and prices of materials had discouraged developers from continuing their projects. Hendra Hartono, Procon chief business development executive, said only developers that mobilized financial resources on pre-sale payments and cash flows or on strong commitments from would-be tenants would continue their projects. Dini said that the public's low purchasing power in the country, affected by high interest rates, slower economic growth and high inflation, would hurt the sector on the demand side next year. Key Bank Indonesia interest rate currently stands at 9.5 percent, with accumulative inflation already hitting double digits in the first ten months of the year. Meanwhile, Indonesia's economic growth target has also been adjusted in response to the global economic downturn. The government's revised 2008 state budget lowered the assumption on targeted growth for this year end to 6.46 percent, from the previous 6.8 percent. Next year, the economy is earmarked in the 2009 state budget to grow by 6 percent. The high interest rate, for example, has pushed the mortgage rate up to 17 percent, which will not be so attractive for potential buyers, according to Procon in its third quarterly Jakarta property market review and 2009 outlook. The report says the rupiah's depreciation against the U.S. dollar also pushed up construction costs, which will affect the new supply of properties. Meanwhile, the rupiah's depreciation has also boosted the cost of U.S. dollar-denominated property rentals, which will affect occupation rates of properties. The value of the rupiah depreciated from Rp 9,330 against the dollar on Sept. 24 to Rp 10,850 by Tuesday. While the outlook is a bit gloomy in the coming year, the property sector did fairly well in this year's third quarter, the report shows. It says cumulative supply of office space at Jakarta's central business district (CBD) rose to 3.81 million square meters as of September from 3.63 million square meters as of June, while the cumulative demand increased to 3.29 million square meters from 3.21 million square meters. The cumulative supply of rental apartments increased to 35,000 units from 34,460 units and the cumulative demand to 25,200 units from 24,000 units. (dis)
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Potential
buyers, occupants adopt "wait-and-see" attitude
Arief Rahardjo, CONTRIBUTOR, JAKARTA Entering 2009, property business players may still be unable take a sigh of relief. Understandably, the global crisis that has caused an economic slowdown and interest rates that remain high will surely affect purchasing power and demand. The property industry, which has been flourishing in the past few years, showed signs of a slowdown early this year. The 6.2 percent annual economic growth in 2008 may not be matched and the economic outlook this year may be worse, namely 4.5 to 5.5 percent, caused by a drop in consumption in both the private and government (infrastructure projects) sectors. A number of property subsectors are showing these signs. Take, for example, rented office space in Jakarta's CBD. In 2008, its annual absorption of 312,000 square meters was a record high since 1997, but this level will surely drop to 145,000 sq m in 2009. The supply in either the office or retail sector entering the market in this area will remain large. In 2009, there will be a supply of new office space totaling 324,800 sq m so that the cumulative supply will become 3.7 million sq m. Although demand for rented office space in the CBD has dropped, it remains at a positive level. Demand for rented office space is expected to drop because most business fields will be very cost conscious. The sector that previously served as the main engine to drive demand in the office market (banks and finance) does not seem to be dominant any longer. Meanwhile, the sectors of oil and gas, information technology/telecommunications and consumer goods are expected to remain active. Demand from the export-import sectors and from the sectors related with commodities is also expected to be very "quiet" in 2009. In future there will be more lease renewals (short-term) rather than relocation (to avoid capital flight) and non-aggressive expansion. As occupancy, it will drop to 83 percent because quite a large new supply will enter the market in 2009 that is not matched by an increase in demand. About 93 percent of this supply will be Grade A office buildings. Nearly 60 percent of the supply, the construction of which is estimated to be completed, will enter the market in the second semester of 2009. The average gross rent rates in 2009 are projected to remain unchanged. Although demand has dropped, building owners will try not to lower rental rates. The drop in oil prices (which helped reduce inflation) will have a positive impact on operational spending so that service charges that have been projected to rise in 2009 can be kept at their current level. Throughout the fourth quarter of 2008, new shopping centers had anchor and mini anchor tenants, such as Hypermart and Matahari Department Store in Pejaten Village, Best Denki in Pacific Place and Gramedia in Pondok Gede Plaza 2, Mal Ciputra and MalFatmawati. High-end British department store Harvey Nichols opened its first outlet here in Grand Indonesia. The F&B business is still showing signs of growth, marked by the expansion of a number of outlets such as Sour Sally in fX, Mal Taman Anggrek and Pacific Place; NYDC, Warung Pojok, Kiyadon, Hoka Hoka Bento and Tator in Grand Indonesia; Saboga in Plaza Senayan and Setiabudi One; JCo and Bread Talk in Mall of Indonesia and Pluit Village, and D'Excelso in Mal Kelapa Gading 3. Upmarket specialty stores were also expanding in the fourth quarter of 2008. These includein Pacific Place, Nautica in Plaza Indonesia and Senayan City, Miss Sixty in Plaza Senayan, Samsonite and Braun Buffel in Senayan City, Emile et Rose in Plaza Indonesia and Geox & Che Che New York in Grand Indonesia. Cumulative demand is expected to grow by nearly 9 percent in 2009. The high initial commitment level at a number of shopping centers now at the stage of construction completion gives a guarantee to the level of absorption in 2009. In terms of F&B, local tenants will dominate rental transactions at Jakarta's shopping centers. Meanwhile, stores selling international brands (F&B and otherwise) will postpone expansion. In 2009, it is estimated that the overall level of occupancy will drop to 76 percent, while in the long run the occupancy level will depend on large-scale tenants at shopping centers completing their fit-out prior to starting their retail activities. The year 2009 will continue to be marked with many additional new supplies totaling 293,100 sq m, of which 73 percent will come from rented shopping centers constituting part of multi-functional development. It is estimated that there will be a postponement in the completion of the shopping center projects now at the stage of construction. Meanwhile, construction and marketing of a number of shopping centers in the planning stage are also expected to be postponed. A large supply will come not only from shopping centers but also from rented apartment buildings. In 2009, it is estimated there will be a supply of 7,000 units, more than the figures recorded in 2007 (5,386 units) and 2008 (3,429 units). The majority of this supply will be condominiums to be rented out by the owners. The writer is associate director, research and advisory, Cushman & Wakefield, Indonesia.
FEB 2009 TBA Monday, February 2, 2009 Property outlook at a time of global crisis Utami Prastiana , Associate Director | Fri, 01/30/2009 3:13 PM | Business Indonesia's economic indicators have been unimpressive with the depreciation of the rupiah by more than 14 percent since the third quarter 2008. The Jakarta Composite Index in October fell to 1,355 points whilst inflation soared to around 11 percent by end of December. The excellent performance of Indonesia's exports has buoyed Indonesia's economic growth to remain steady at 6.2 percent from a year earlier, well within the government's target. With the deepening global financial crisis it is anticipated most property sectors will be impacted despite the government's actions to prevent this.
In Jakarta, absorption in the condominium market was relatively stable. In Q4 2008 around 1,900 units were transacted and a total of 9,600 units were transacted throughout 2008. The strong take up was contributed mainly from newly launched projects with prices between Rp 200 - Rp 500 million per unit, within CBD locations, with good access to major public transportation, and investment motivated buyers. The high mortgage rate and tighter competition created negative sales in some projects located in the West, CBD and South Jakarta. A slight decline in the rental apartment occupancy rate to 69.7 percent was also recorded in the previous quarter. Service apartments is the only sub sector that actually reached higher occupancy levels compared to the same quarter in 2007. The Jakarta office market showed strong performance to date with stable office occupancy rates recorded at 86.4 percent last quarter. High annual demand during 2008 was contributed by the absorption of major tenants in newly completed buildings. Retail development is expected to slow and careful planning considerations will be critical to success in this sector. Industrial market investors have adopted a wait and see stance however, some foreign investors and local investor are still active in seeking small industrial land and standard factory buildings (SFBs). The condominium market performance is predicted to slow in 2009. Property developers and buyers will carefully consider their investment decisions due to high interest rates and tighter loan approvals. The sales rate of existing condominiums will remain stable at around 95 percent, and average pre-sales rate of proposed new supply has reached almost 70 percent. Developers will start to offer flexible payment terms, such as longer installment/balloon payment terms, resizing their units, and offering special packages such as rental guarantees. It is believed that a more flexible foreign property ownership regulation will be a good stimulator to push the condominium market. Office future supply by end of 2010 will dominate the Kuningan and Thamrin areas and South Jakarta. Occupancy levels in 2009 and 2010 are predicted to hover at 84.0 percent - 86.0 percent, due to the high new supply to be completed with lower current pre-commitment level achieved. Office leasing activity is expected from relocations for rental efficiency, subleasing activities, space downsizing and surrendering of leased spaces. Further pressure in gross rental will be a challenge for landlords, although the effect of high inflation rates during 2008 has created higher operational costs. The retail sector will face tighter competition with more pressure on rental and occupancy rates, and nine new projects opening in 2009. Jabodetabek projected annual net supply for 2009 and 2010 will be 316,000 sm and 132.000 sm, respectively and about 117,000 sm is scheduled for opening in the next quarter. Occupancy rate of Jakarta retail centers is predicted to remain stable at around 77 percent over the next two years. Limited new supply in the Debotabek area until 2010 will slightly increase the overall occupancy rate to 75 percent. Pressure on rental rates is expected to continue due to the lower economic growth projections, lower consumer spending and high competition. Further decreases in fuel prices will help reduce pressure on operational costs. In the industrial sector, Bekasi is the favored area for industrial estates due to it's accessibility to the harbor. As foreign investors prolong purchasing decisions until signs of recovery in the global economy, the industrial estate market is expected to slow. The writer is an associate director at Procon Indonesia and can be reached at utami.prastiana@procon.co.id
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