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The Implementation & Governance of MP3EI

The function of coordination, control, monitoring, and evaluation is the key to successful implementation of MP3EI. For that, the mechanism and structure of the strategic unit entrusted with the responsibility to carry out these functions are formulated.

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Figure 4.1 Implementation Phases of MP3EI

The Implementation & Governance of MP3EI

A. Implementation Stage
MP3EI is a long term plan for the economic development of Indonesia. A gradual but continuous implementation is a key factor to the success of MP3EI. The implementation of MP3EI is planned in three phases up to year 2025, as follows:

2011 Phase 1: Quick-wins Implementation

2015

2020 Phase 2: Strengthen Economic & Investment Bases

2025 Phase 3: Sustainable Growth Implementation

To establish and function MP3EI committee Preparing Action Plans regarding regulations, debottlenecking, permits, incentives, infrastructure development and implementation of investment commitments (quick-wins) The establishment of International hubs: seaports and airports Strengthening research and development institutions in every corridor Human resource development for the corridors main economic activities

Accelerate the development of longterm infrastructure projects Strengthen the innovation ability to increase competitiveness of main economic activities Improve economic governance in various fields Expand the development of industries creating added value

Maintaining sustainable national competitiveness Expanding high-technology adaptation for future sustainable development

As illustrated in Figure 4.1, each phase has a different focus. Phase 1 (2011 2015) will focus on the implementation of MP3EI and the operationalization of the MP3EI implementation committee. The MP3EI implementation committee will prepare action plans for debottlenecking of various pending regulations, licenses, incentives, as well as commencing the investment commitment (quick-wins). National connectivity will be strengthened in this phase by assigning primary seaports and airports as international hubs in western and eastern Indonesia. Human resources development, research facilities, and research activities will be further developed as a starting point to increase the contribution of research and technology in supporting the development of main economic activities in every corridor. On a shorter term, MP3EI will be focusing on the implementation of various action plans which should be completed by 2014. These action plans will ensure that initiative strategies are well implemented to accelerate and expand the economic development in the coming phases. The establishment and operationalization of a MP3EI Implementation Committee need to be prioritized along with the streamlining of various regulations and accomplishing various investment projects in main economic activities by all related stakeholders. Phase 2 (2016 2020) will focus on the acceleration of long term infrastructure development, enhancement of innovation to improve competitiveness, improvement of economic governance in various fields, and encouragement of industry which will create added value. Phase 3 (2021 2025) will focus on the enhancement of national industries to compete globally, as well as the implementation of high level technologies to achieve sustainable development.

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B. Improvement of Regulations and Permits

To attain the acceleration and expansion of the economic development in Indonesia, infrastructure and non infrastructure development is needed. The implementation, establishment, and improvement of regulations and permits at the regional and national levels are the keys to success for MP3EI. At the national level, improving cross sector regulations and streamlining permit applications are needed, especially those relating to spatial management, labor, taxation, and the ease of capital investment in Indonesia. At the local level, regulation and permit improvements are needed, especially those concerning the mineral and coal, forestry, and transportation (railways, shipping, aviation) sectors, as well as basic infrastructure. Regulation and permit improvements should be implemented in order to achieve general objectives as follows: 1. Accelerate the completion of law implementation regulation; 2. Eliminate the overlap between existing regulations, both at the central and local government levels as well as among sectors and institutions; 3. Revise and establish required regulations to support MP3EI (such as export tax for several commodities); 4. Provide incentives for main economic activities that is consistent with MP3EI strategies; 5. Accelerate and simplify the process of issuing permits. Table 4.1, Table 4.2, Table 4.3, Table 4.4 show several pending regulations, incentives, and permits which were identified during the preparation of MP3EI. The lists of regulations and permits is subject to change during the development of action plans.

National Regulations and Permits

The following table shows a list of national regulations and permits which must be revised to support the development of main economic activities: No
1

Laws
Review Law and Government Regulations related to the application of communal land (tanah ulayat) as an investment component which will enable the land owners to gain higher economic benefits. (this review is needed to support the MIFEE program). Revise Law No. 13 Year 2003 regarding Man Power related to articles about employment contract, outsourcing, and severance pay. Revise Law No. 28 Year 2009 regarding Regional Tax and Retribution. Revise Law No. 4 Year 2009 on Mineral and Coal Mining regarding business uncertainty business permits are usually given for a certain period of time (20+10+10 years), mechanisms to change a contract status from The Coal Mining Rights Agreement (Perjanjian Karya Pengusahaan Pertambangan Batubara/PKP2B) and working contracts to a business permit. Note: Judicial review of Law No. 4 Year 2009 is being proposed to the Constitutional Court Review Law No. 22 Year 2001 on Oil and Gas Simplification of business patterns, mechanisms of the lex specialist for the application of taxation, the clarity of the national oil reserves asset management. Note: change of oil and gas mind set from revenue based to economic growth based In line with Law No. 1 Year 2009 on Aviation and Law No. 17 Year 2008 on Shipping, the separation between regulatory functions (Airport/Port Authority) and operating functions (Enterprise) has to be accelerated. In addition, based on the Law No. 23 Year 2007 on Railways, it is mandated that the Provider of Infrastructure and Rolling Stocks in Railways must be separated. Revise Law No. 30 Year 2009 on Electricity to improve private sector participation in providing electricity. This revision is also needed to regulate the development of Renewable Energy (Energi Baru dan Terbarukan/EBT).

Responsible Institutions
National Land Agency, Ministry of Forestry, Ministry of Home Affairs Ministry of Manpower and Transmigration Ministry of Finance, Ministry of Home Affairs Ministry of Energy and Mineral Resources

Time Target
December 2011 January 2012 December 2011 December 2011

2 3 4

Ministry of Energy and Mineral Resources

December 2011

Ministry of Transportation

December 2011

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Table 4.1 List of Laws

Ministry of Energy and Mineral Resources

December 2011

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1

Government Regulation
Revise Government Regulation No. 38 Year 2003. Tax Exemption for Imported Raw Material to be utilized in Defense Equipment Industries (originally exemption is given for ammunition, and weapon, and it is proposed to be extended to include ammunition, weapon, combat vehicles, aircraft, radar, ships, and optical equipment). Revise Government Regulation No. 18 jo. PP No. 85 Year 1995 which is to be harmonized with Law No. 32 Year 2009 on Environmental Management which distinguishes B3 waste (Toxic and Hazardous Materials) with special waste in order to facilitate the utilization of industrial wastes by industries as well as by waste producing industries in order to improve the competitiveness of domestic industries. Revise Government Regulation No. 69 Year 1999 on Food Labeling and Advertising related to the labeling of goods and packages in Indonesian language. Revise Government Regulation No. 62 Year 2008 on the Amendment of Government Regulation No. 1 Year 2007 concerning income tax facilities for investment in specific sectors and or in specific areas the establishment of new sub-sectors according to the MP3EI priority which is worth to receive tax allowances (such as, the IRR for Coal Bed Methane gas will not be attractive without any incentives given). Revise PP No. 68 Year 1998 on Nature Conservation Area and Nature Reserve Area and followed by issuing Perpres regarding underground mining in order to increase geothermal investment. Acceleration of draft of Government Regulation for Master Plan of National Tourism Development (Riparnas) 2010-2025. Prepare technical guidelines under The Ministry of Finances regulation to implement the Government Regulation No. 35 Year 2007 on Allocation of Enterprise Revenue in order to Improve Engineering, Innovation, and Diffusion Technology Capability Technical criteria and establishment governance need to be formulated and agreed by all shareholders.

Responsible Institutions
Ministry of Finance

Time Target
December 2011

Ministry of Environment

July 2011

3 4

Ministry of Trade, Drug and Food Regulatory Agency Ministry of Finance

December 2011 December 2011

5 6 7
Table 4.2 List of Government Regulation

Ministry of Forestry, Cabinet Secretariat Ministry of Culture and Tourism Ministry of Finance, State Ministry of Research and Technology

December 2011 June 2011 December 2011

No
1

Presidential Regulations (Perpres), Presidential Decrees (Keppres), Presidential Instructions (Inpres)

Issue Presidential Regulation following the revision of The Joint Ministries Decree regarding PSO, IMO and TAC of Railways.

Responsible Institutions
Ministry of Transportation, The Ministry of National Development Planning, Ministry of Finance The Coordinating Ministry for Economic Affairs, Ministry of Finance, Ministry of National Development Planning, Indonesia Investment Coordinating Board Ministry of Culture and Tourism The Coordinating Ministry for Economic Affairs, Cabinet Secretariat

Time Target
December 2011

Revise Presidential Regulation No. 13 Year 2010 Concerning Government and Private Partnership in the Provision of Infrastructure.

July 2011

Issue Presidential Decree on the Establishment of Indonesian Tourism Promotion Board (BPPI) as it is mandated by Law No. 10 Year 2009 on Tourism. Issue regulations regarding Forestry Moratorium.

May 2011

July 2011

Table 4.3 List of Presidential Regulations (Perpres), Presidential Decree (Keppres), Presidential Instruction (Inpres)

Issue regulations to encourage infrastructure development in the eastern part of Indonesia.

Ministry of Public Work, Ministry of Transportation

December 2011

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No
1

Ministerial Regulations
Review Ministry of Finance Regulation (PMK) 67/10 regarding the stipulation of Export Duty for export commodities as well as refund mechanism for the development of relevant sectors through DIPA mechanism. Particularly related to the application of progressive Export Duty for Palm, Rubber, Cocoa, including its derivative industries (e.g. biodiesel industry); and integrated Value-Added Tax in order to avoid double taxation. Issue regulations regarding the implementation of DMO for coal, oil and gas supporting the downstream industries for rubber, oil palm, cocoa, and steel.

Responsible Institutions
Ministry of Finance and Ministry of Trade

Time Target
August 2011

Ministry of Energy and Mineral Resources, Ministry of Agriculture Ministry of Finance

December 2011

Issue a technical regulation (Ministry of Finance Regulation) on the types of industries which are eligible for tax holiday (based on Government Regulation No. 94 Year 2010 regarding the Calculation of Taxable Income and Income Tax Payment in the Current Year).

August 2011

Issue technical regulation regarding the development and cultivation of Genetically Modified Organisms (GMO) for food crops and plantations (as the elaboration of Government Regulation No. 21 Year 2005 on Biosafety Genetically Engineered Products).

Ministry of Agriculture and Ministry of Environment

October 2011

Issue regulations regarding incentive/facilitation to accelerate investment in centers of agricultural production, animal husbandry, and fishery industries.

Ministry of Finance, Ministry of Agriculture And Ministry of Maritime Affairs and Fishery

August 2011

Revise Ministry of Finance Regulation No. 107 Year 2001 regarding the Import Duty exemption for Defense Equipment, which originally had to be supported by a data contract (RIB) but now it is proposed by simply giving a production plan approved by Ministry of Defense. Revise Ministry of Finance Regulation No. 241 Year 2010 regarding the Imposition of Import Duty for Raw Materials as well as Capital Goods for Manufacturing Pharmaceuticals, Cosmetics, Traditional Medicines, and Machinery Equipment Graphics Industry. Revise Ministry of Finance Regulation No. 140 Year 2007 regarding Temporary Import. It is proposed that the Import Duty exemption be applied to imported vehicles or specific goods that are used by foreign tourists during their stay and imported equipment that is used only for specific activities in relation to the MICE (meeting, incentive, convention, exhibition). Issue regulations regarding the utilization of abandoned land.

Ministry of Finance

December 2011

Ministry of Finance

August 2011

Ministry of Finance

December 2011

National Land Agency, Ministry of Home Affairs, and Local Governments

July 2011

Table 4.4 List of Ministerial Regulations

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Regulations and Permits in Regional Level

Below are several identified problems that need further actions in order to improve regulations and permits at the regional level: 1. Finalization of Provincial Spatial Planning (RTRW Propinsi) which will be used as a basis to overcome potential land use conflict in utilization as forest, plantation, and mining area. BKPRN and Regional Governments should conclude the RTRWs by December 2011. 2. There are still challenges in the security sector which to an extent also concerns tourist destinations. To create a better and safer place for all, local governments need to improve safety and security capabilities through the implementation of strict rules and sanctions for crimes (Law Enforcement). In addition, there are several other local regulations which have hampered investment activities (e.g. Regional Regulations on Retribution application in several local governments). These regulations need to be reviewed and aligned to ensure that MP3EI is well implemented.

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C. Monitoring and Evaluation

In order to ensure the implementation of various strategies of acceleration and expansion formulated under MP3EI, a special and dedicated committee will be formed. This committee will be chaired by the President of the Republic of Indonesia in order to enhance efficiency in coordinating, monitoring, evaluating, and taking strategic decisions to deal with various problems that arise during the implementation stage. This committee should comprise of competent stakeholders including KEN, KIN and business. Daily implementation will be coordinated by Coordinating Minister for Economic Affairs. At the regional level, the Governor will play a key role in the implementation of regional development programs in each economic corridor. It is expected that Governors are able to establish and enhance the existing governor`s forums to create unity and harmony in inter or intra-economic corridors. This committee has been established under the Presidential Regulation No. 32 Year 2011 regarding the MP3EI. The committee will be supported by Working Team and a dedicated and professional Secretariat with the following explanations: 1. The Working Team shall consist of High ranking officials (echelon 1), and key officials from relevant agencies who will be involved in the implementation of MP3EI action plans. The Working Team is responsible for coordinating the implementation of investment projects and infrastructure projects. This team, will be in collaboration with relevant agencies, and is also responsible for solving inter-ministerial problems, and ensuring government support for the implementation of MP3EI. The Secretariat is a dedicated and full time supporting team that is responsible for developing a monitoring and coordinating system for progress of MP3EIs implementation. The secretariat will actively support the Implementation Team and Working Team by providing them with a clear analysis and technical proposal to overcome the problems arising from daily monitoring.

2.