Unfavorable tax policy discouraging electronics-makers from
\nentering RI<\/p>\n
The Jakarta Post
\nJakarta<\/p>\n
A global electronics giant planned to set up a manufacturing
\nplant here in the mid-1990s, hoping to benefit from the country's
\ncheap labor pool and huge market potential. But the firm shelved
\nits plans and instead set up in neighboring Malaysia, because it
\nfound that Indonesia's tax policy made it cheaper to import its
\nproducts into the country.<\/p>\n
From 1990 to 1995 Indonesia was among the darlings of the
\nworld's largest electronics-makers, but since then there has been
\neffectively no new investment in the electronics sector. Instead,
\nelectronics-makers have found neighboring countries like
\nMalaysia, Vietnam and China much more appealing.<\/p>\n
"One of the problems is the unfavorable tax policy," said
\nAnton Supit of the National Economic Recovery Commission.<\/p>\n
He added that several electronics-makers already in Indonesia
\nwere considering moving out of the country because of such
\nproblems as labor conflicts, poor security and rampant smuggling.<\/p>\n
The cash-strapped government began an aggressive tax policy in
\nthe late-1990s to help finance the country out of its economic
\ncrisis.<\/p>\n
As a result of this policy, companies that import electronic
\ngoods have to pay a relatively low import duty of about 20
\npercent (and only 5 percent under the regional free trade area).
\nCompare this to the approximately 32.5 percent tax they would
\nhave to pay if they manufactured those same items in the country.<\/p>\n
The chairman of the Indonesian Electronics Manufacturers
\nAssociation, Lee Kang Hyun, who is also the general manager for
\nmarketing at PT Samsung Electronic Indonesia, said the government
\nshould consider providing tax incentives for global electronic-
\nmakers, particularly those setting up new manufacturing units
\nhere.<\/p>\n
"There are no tax advantages here," he said.<\/p>\n
He proposed that the value added tax on electronic goods,
\ncurrently at 10 percent, be reduced to between 3 percent and 5
\npercent.<\/p>\n
He said if the government provided tax incentives or tax
\nholidays, global electronics-makers like Samsung would be induced
\nto set up manufacturing plants here for digital-based electronic
\ngoods or IT products.<\/p>\n
"IT and digital products are the future of electronic
\nproducts," he said.<\/p>\n
He said Indonesia produced 50 percent of the VCRs in the
\nglobal market, but these types of products would soon be obsolete
\nas more people embraced digital-based products.<\/p>\n
Lee also said rampant smuggling discouraged the headquarters
\nof global electronics-makers from setting up plants in Indonesia.<\/p>\n
He said a global headquarters would only set up an overseas
\nplant if it could win the competition in the local market, in
\naddition to using the plant as an export base for the regional
\nmarket.<\/p>\n
But if cheaper smuggled products dominate the market,
\nelectronics-makers will shy away from establishing local plants
\nbecause they will lose the competition.<\/p>\n
Many companies have long complained about the rampant
\nsmuggling of electronic products in Indonesia.<\/p>\n
Anton expects that a newly established crisis center will help
\ndeal with the problem of smuggling.<\/p>\n
Minister of Industry and Trade Rini MS Soewandi said last week
\nthat she would launch a new crisis center on Monday, with the
\nmain aim of helping resolve various problems faced by businesses.
\nIt is hoped this step will help prevent more investors from
\nfleeing the country.<\/p>\n
The crisis center will focus its antismuggling efforts on
\nmajor commodities such as textiles, electronics, footwear, sugar,
\nlogs and crude palm oil.<\/p>\n
Anton said the crisis center should also help persuade the
\nfinance ministry to provide tax incentives for electronics-makers
\nstarting up operations to manufacture new high-tech products
\nhere.<\/p>\n
"The government should find a breakthrough," he said.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/unfavorable-tax-policy-discouraging-electronics-makers-from-1447899208", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }