Indonesia plans to offer new incentives in a bid to attract $5 billion of domestic and foreign investment into its raw materials sector, the state investment agency (BKPM) said on Tuesday (13/2/07).
The government is considering offering tax breaks and guarantees for supplies as it seeks to draw more firms into the cocoa, palm oil and rubber sectors, the head of the agency, Muhammad Lutfi, told Reuters.
He said Indonesia is aiming to become a "formidable" player in the world market for refined products by offering incentives to firms to refine raw materials in the country instead of selling unprocessed materials.
The government of one of the world's top producers of raw materials is hoping the incentives will encourage new projects that will start commercial production within two to three years.
He said the move is critical to cut high unemployment and poverty in the country, which has struggled to attract investment since the Asian economic crisis a decade ago.
He said he expects the palm oil sector to attract $1.5 billion of new investments in processing 3 million to 4 million tons of crude palm oil into refined products. "We produce around 15 million tons of crude palm oil, with around 5.4 million absorbed by the domestic market. We export the rest. Looking ahead, we expect to sell an additional at least 3 million to 4 million tons of refined products," he said.
Indonesia is set to overtake Malaysia as the world's biggest palm oil producer this year. It is the world's second biggest rubber producer and the world's third biggest cocoa producer.
Lutfi said the government also expects to attract investments worth at least $500 million in the cocoa sector through the development of cocoa processors in the country's main cocoa-growing areas of Sulawesi.
The government expects the new scheme to help it build two new oil refineries worth $4 billion to support the country's petrochemicals industry. He declined to elaborate, but said the new scheme should help boost overall investment in Indonesia.