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Axis Capital Funding Regional Group Review: Equipment Leasing Status in Jakarta, Indonesia

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Indonesia is one of the most famous archipelagic nations in Asia. To better understand their equipment leasing status and their market, let us know more about them first. There are 17,500 islands that make up the archipelago with 240 million populations residing in the main islands of Java, Borneo, Sumatra, Suwalesi and New Guinea. They are the fourth most populous country in the world. The country is not only rich with people but also with natural resources like oil, gas, tin, copper and gold among many others. Indonesia has placed 3rd in the world for mineral resources. It has a republican government and is considered the most corrupt country in South East Asia according to the annual poll conducted by the Political and Economic Risk Consultancy (PERC). – PowerPoint PPT presentation

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Title: Axis Capital Funding Regional Group Review: Equipment Leasing Status in Jakarta, Indonesia


1
Indonesia is one of the most famous archipelagic
nations in Asia. To better understand their
equipment leasing status and their market, let us
know more about them first.
2
  • There are 17,500 islands that make up the
    archipelago with 240 million populations residing
    in the main islands of Java, Borneo, Sumatra,
    Suwalesi and New Guinea. They are the fourth most
    populous country in the world. The country is not
    only rich with people but also with natural
    resources like oil, gas, tin, copper and gold
    among many others. Indonesia has placed 3rd in
    the world for mineral resources. It has a
    republican government and is considered the most
    corrupt country in South East Asia according to
    the annual poll conducted by the Political and
    Economic Risk Consultancy (PERC).

3
  • Equipment leasing plays an important role in the
    countrys economy (US 5 billion) which has been
    driven by the mining and the plantation
    industries. Vehicle finance is the strongest
    contender in equipment leasing. Analysts predict
    that vendors and joint ventures will soon pave
    the way for the countrys equipment leasing to
    international experience. The countrys
    competitor in this field is Singapore, China and
    Thailand as Indonesias infrastructure industry
    is the fastest to develop in all Asia, according
    to reports and the need for leasing equipment is
    a must.

4
  • According to Vinod Kothari Report in 2013,
    leasing in Indonesia started in 1974 through a
    joint decree between the Ministry of Finance,
    Industry and Trade and Cooperation on License for
    Leasing Companies While Indonesian market has
    huge potential being a fast growing developing
    nation, there are bottlenecks at the macro-level
    in terms of regulatory uncertainty, poor existing
    infrastructure, corruption etc. With a strong
    potential for leasing financing in Indonesia and
    few players to meet the demand, leasing is
    already on its growth trajectory.

5
  • Taxation of financial leasing in Indonesia is
    included in the decree of law. The rentals paid
    by the lessee to the lessor shall be expensed by
    the lessee throughout the lease period. In case
    of financial lease, the lessee has an option to
    buy the asset, once that option is exercised, the
    lessee will be able to claim depreciation on the
    capital asset on its residual value.

6
  • The lessor cannot claim depreciation on the
    capital goods. He can however do a non-taxable
    provision (for bad debts) equal to a maximum of
    2.5 of receivables. In case this provision is
    not utilized, the same can be treated as income
    in the year of its realization. In the instance
    the provision proves insufficient to meet the
    losses, the same can be deducted from the gross
    revenue.

7
  • There is a very strong potential for leasing
    finance in Indonesia. Indonesia needs to invest
    hugely in areas such as medic al, IT,
    infrastructure, mining, agriculture, education
    and transportation.
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