Tue, 12 Dec 2006
From January 1, 2007, Indonesia will give investors in certain industries a tax allowance to attract investment to the country, Investment Coordinating Board (BKPM) chairman, Muhammad Lutfi, said Monday (4/12/06).

A total of 30% of each investor's realized investment will be deducted from their tax bill, Lutfi said in a speech to a South Korea-Indonesia business gathering.

The deduction will be spread over six years, amounting to 5% per annum, he said, according to Dow Jones Newswires.

Companies eligible for the deduction are those investing in the flavor industry, textiles and garments, pulp and paper, chemicals, rubber and rubber products, porcelain goods, iron and steel, metal, machinery, land transportation, electric motors, ships and ship repair.

During the occasion, Lutfi also promoted the special economic areas of Batam and Bintan that provide special tax regulations for export-oriented industries. "Imports of raw materials and capital goods to the areas will be given tariff concession while exports are exempted from export duty," he was quoted as saying by Antara.

Lutfi said Indonesia is seeking to develop manufacturing industries to create added value and employment. "We can no longer promote the sale of raw materials or half-finished products," he said.

He noted that early next year, his office, in cooperation with the departments of industry and trade, the National Agency for the Assessment and Application of Technology, and the National Development Planning Board, would map out top industries for promotion to foreign investors.

One of the industries to be promoted is the petrochemical industry and its derivative industries. "With oil and gas production reaching 1.6 million barrels a day, we need to have a good petrochemical industry. Now, we only have one aromatic chemistry industry and one complete petrochemical industry," he said, adding that most of the raw materials of the country's petrochemical industry are reprocessed in Singapore.
Surabaya Bourse Shareholders Approve Merger

Indonesia's second stock exchange, the Surabaya Stock Exchange (SSX), has received shareholder approval to proceed with a merger with the Jakarta Stock Exchange, its president director said on Friday (8/12/06).

The SSX management had set up a team to meet with its counterpart from the Jakarta bourse to discuss the merger process, Bastian Purnama told Reuters in a telephone interview. "We hope the merger process can be completed within the next six months. In principle, the sooner the better," Purnama said.

The tie-up is aimed at improving the operating efficiency of the two bourses and giving Indonesians more flexibility in investing in the equities market.

"The shareholders of Jakarta Stock Exchange had given their approval for the merger in May 2006, but we were waiting for a response from the Surabaya exchange," Erry Firmansyah, president director of the Jakarta Stock Exchange, told Reuters. "But since their shareholders had given their approval, early next week we will have a meeting for the merger preparation."

When asked if the bourse would have an initial public offering after the merger, Purnama said, "We still need more time as the current law on stock exchanges does not allow us to go public."
"We need a new stock exchange law. At this time, it cannot be done. We are waiting for the new law that will be discussed in parliament," he added.

The Jakarta bourse is the largest exchange in the country with a market capitalization of about $135 billion. The Surabaya bourse is the country's main bond exchange.



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