Bonded zones for Batam<\/p>\n
The government has finally moved firmly to resolve several
\nyears of controversy and political debate over the status of
\nBatam, an island 30 kilometers southeast of Singapore, by
\ndeclaring it only to be an enhanced bonded zone, not a full free
\ntrade zone (FTZ) as demanded by foreign and domestic investors.<\/p>\n
The decision ends, for the time being, the political move to
\nturn Batam into an FTZ, which reached its height in September,
\n2004 when the then House of Representatives unilaterally approved
\na House-initiated bill conferring FTZ status on the island. The
\nlegislation never came into force as the Constitution stipulates
\nthat both the government and House must give their approval to a
\nlaw.<\/p>\n
By virtue of Finance Minister's Decree No.60\/2005 issued last
\nmonth, Batam and its surrounding islands of Bintan and Karimun in
\nthe Riau archipelago are given the status of enhanced bonded
\nzones, or enclave FTZs.<\/p>\n
This means that exemptions from import duty and other taxes
\ndue on imports are granted only for imports used in the
\nproduction of exports, rather than those intended for domestic
\nconsumption. Hence, manufacturers entitled to such exemptions are
\nonly those located in industrial estates (areas) already
\ndesignated as bonded zones and only when their imports are meant
\nas inputs for export goods.<\/p>\n
Similar to the Nusantara bonded zones at Cakung in Jakarta and
\nnear Belawan seaport in North Sumatra, imports from foreign
\ncountries and from the Indonesian customs area into the bonded
\nzones in Batam, Bintan and Karimun are exempted from import duty
\nand other taxes related to imports, and are not subject to
\nphysical customs inspection. However, exports from the bonded
\nzones into the Indonesian customs area within the islands and
\nother parts of the country are subject to import duty and other
\ntaxes due on imports.<\/p>\n
We agree with the government's argument that granting Batam
\nand the other two islands FTZ and free port status would be
\neconomically and fiscally ill-advised for the long-term good of
\nthe national economy and could set a dangerous precedent, which
\ncould trigger a string of new demands for similar facilities from
\nthe people on other islands.<\/p>\n
Anyway, returning Batam to the national tax regime is not
\nreally a drastic move that would scare away investors as
\nconsumption taxes have after all been imposed on several goods
\nthere. Since early 2004, domestic sales of motor vehicles,
\ntobacco and cigarettes, liquor and electronic goods in Batam have
\nbeen subject to value added tax and luxury sales tax.<\/p>\n
The bonded-zone concept makes a lot of sense as, unlike other
\nbonded industrial zones in the country that are entirely
\nisolated from residential areas, Batam has developed into a
\nlarge city complete with a municipal administration and a wide
\nmixture of residential areas, trading centers and industrial
\ncomplexes. Manufacturing is only one part of its mainstream
\neconomic activities.<\/p>\n
Making the whole of Batam island an FTZ could turn it into a
\nbastion for import smuggling to other parts of Indonesia,
\nespecially as Batam and the other two islands have small seaports
\nthat are difficult to oversee.<\/p>\n
The government, however, should ensure that the flow of goods
\ninto and out of the bonded zones is truly smooth, free from
\nharassment by the customs service, tax officials and the national
\npolice.<\/p>\n
Also important is that the process of licensing and
\ndesignating industrial areas\/estates as bonded zones should be
\nmade transparent, expedient and free from corruption --
\notherwise, many export-oriented industrial plants may decide to
\nmove to other bonded zones overseas.<\/p>\n
True, as the proponents of FTZ status have argued, a bonded zone
\nthat uses a system of bonded warehouses to transship goods
\nbetween suppliers, factories and customers is costlier to operate
\nand often causes delays associated with customs clearance,
\nespecially with Indonesia's customs service perceived to be one
\nof the most corrupt public institutions in the country.<\/p>\n
This is the main concern the government should address, by
\ndesigning effective administrative machinery for the bonded zones
\nthat is capable of minimizing the encumbrances involved in
\nshipping materials.<\/p>\n
Smooth imports and exports are quite vital as the types
\nof industrial companies operating in Batam are highly mobile and
\nhighly sensitive to factors that delay goods shipments or
\nincrease costs.<\/p>\n
The enhanced bonded zone system should, therefore, ensure that
\ngreedy customs and tax officials have little opportunity to
\nhinder the flow of goods for their own personal gain.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bonded-zones-for-batam-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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