The government is drafting incentives meant to develop value-added industries that process agricultural products, Industry Minister MS Hidayat said on Thursday.
“I have already informed the Ministry of Finance, and they have agreed to fiscal incentives for companies processing raw [agriculture-based] materials,” Hidayat said in Jakarta.
He said the development of downstream industries would increase employment and contribute more to the economy than the simple export of raw materials.
“If we only export raw materials, there will be no added value for us,” Hidayat said.
Indonesia is a major producer of agricultural raw materials such as crude palm oil, rubber, seaweed and cocoa.
The country produced an estimated 20.3 million tons of crude palm oil in 2009, exporting about 60 percent of that as raw material and processing most of the rest into cooking oil.
Hidayat said the government had set a target of reducing the volume of raw exports to 50 percent of national output by 2015 and 30 percent by 2020, with the rest being processed into products such as cooking oil or biofuels.
He said the incentives to develop processing industries might include tax breaks and help with loans.
He did not elaborate.
Deputy Agriculture Minister Bayu Krisnamurthi said downstream industries must be developed to boost employment and export revenue by adding value to exports.
Bayu said taxes would likely be lowered on processed exports versus exports of unprocessed raw materials, creating incentive to process crude palm oil and other agricultural products.
“There must be incentives for industries to process CPO derivatives,” Bayu said.
Rachmat Gobel, the deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said on Monday that the government should revise its policies to help increase investment in industries that process raw agricultural materials into finished products.
“The recent policy does not support the domestic food industry,” Rachmat said.