1. Tax (1 x 45)

1. Tax (1 x 45)

Company fights lone battle against tax extortion
JP/13/Tax

Rendi A. Witular
The Jakarta Post
Jakarta

While members of the business community are generally afraid
to argue with tax officials and would rather compromise with them
in case of dispute, a local businessman has launched an all-out
legal battle against the tax office.

The Constitutional Court recently accepted a petition from
health equipment supplier PT Apota Wibawa Pratama to review the
legality of the tax tribunal, which it said had created
unfairness and a lack of legal certainty for the business
community.

Apota director B.Q. Vega told The Jakarta Post last week that
his company had decided to go to law after it fell victim to what
he described as "unscrupulous behavior" on the part of tax
officials, who were using the tax tribunal as a tool for
extorting taxpayers.

"We have taken into account all the risks and pressures that
may result from our actions ... Our effort is designed to
encourage others to join the fight," said Vega.

Apota's lawyer Denny Palilingan said the firm had decided to
petition the Constitutional Court to overturn Law No. 14/2002 on
the establishment of the tax tribunal, which he said was
repugnant to the 1945 Constitution.

He said the Constitution only recognized five courts -- the
criminal and civil courts (public courts), religious courts,
military courts, administrative courts and the Constitutional
Court.

"Since it is not among the courts recognized by the
Constitution, the legal standing of rulings handed down by the
Tax Tribunal is questionable," said Denny.

He said the tribunal would have to be abolished if the
Constitutional Court overturned the law.

In a second hearing with Apota last week, the Constitutional
Court decided to summon those involved in the drafting of the
law, including Minister of Finance Boediono and a number of
legislators from the House of Representatives.

According to Denny, the tax court law was unfair, as was
evident from the provision preventing taxpayers from appealing
against its rulings.

Another unfair provision was the requirement that a taxpayer
had to pay 50 percent of its total tax bill before filing an
objection with the tax court. This was considered as burdensome
as it could disrupt a company's cash flow, he said.

The high cost of filing objections with the court had caused
some businesspeople to prefer to bribe tax officials.

A source in the Directorate General of Taxation agreed that
the 50 percent payment requirement had often been abused by tax
officials to extort taxpayers.

The source explained that tax officials could inflate the
amount of the arrears owed by companies in order to discourage
them from going to the tax tribunal.

Companies that were unable to come up with 50 percent of the
tax arrears before going to the tax tribunal had no alternative
but to seek a compromise with tax officials, including paying
them bribes.

In the Apota case, the company booked a loss of Rp 240 million
(US$28,235) in 2000, but officials from the Mampang Prapatan tax
office in East Jakarta said the company had to pay Rp 877 billion
in corporate income tax.

2. ASEAN (1 x 45)

Financial markets liberalization to top ASEAN meet

JP/13/ASEAN

Financial markets liberalization to top ASEAN finance ministers
meet

Martin Abbugao
Agence France-Presse
Singapore

Southeast Asian finance ministers meeting here this week are
expected to take stock of work done to liberalize the region's
financial sector, seen as a cornerstone for an envisioned single
ASEAN market, government sources said.

The review will come six months after the leaders of the
Association of Southeast Asian Nations (ASEAN) agreed during
their annual summit on a roadmap to achieve a European Union-
style common market by 2020 or earlier.

Among the measures endorsed at the October meeting on the
Indonesian island of Bali was a series of bold steps to develop,
liberalize and integrate the region's capital markets and
financial services.

Finance ministers drew up the measures during their annual
meeting in Manila in August.

Singapore government sources involved in preparing this year's
finance ministers' meeting, to be held on Tuesday and Wednesday,
said the delegates were expected to "take stock" of work done
since their last gathering in the Philippine capital.

"I don't think that you can expect any major breakthroughs. I
don't think you're going to see any new initiatives that are
going to come up," the official said.

Another official said discussions would look at progress on
initiatives in four key areas, namely the development of capital
markets, liberalization of financial services, the feasibility of
an ASEAN common currency and liberalization of capital accounts.

These initiatives are aimed at bringing about a free flow of
goods, services and investments as well as capital within ASEAN,
which groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Business executives say an integrated ASEAN market would do
better to compete with China and a fast-rising India in terms of
trade and attracting foreign investments.

A delegation from the U.S.-ASEAN Business Council, an American
corporate lobby group, will also hold talks with the ministers.

Council sources said the delegation was expected to discuss
the financing of small and medium enterprises and press the
importance of financial services liberalization in free-trade
agreements.

The finance chiefs will meet in an informal setting during a
"retreat" on Tuesday ahead of their formal gathering on
Wednesday.

On Monday, deputy finance ministers and central bank governors
from ASEAN as well as China, Japan and South Korea will meet
under the ASEAN Plus Three dialogue process.

Sources said a key topic at this meeting would be how to
strengthen a mechanism called the Chiang Mai Initiative, which
allows central banks from the 13 countries to swap foreign
exchange reserves to fight speculative attacks on their
currencies.

Bilateral swap arrangements, now totaling US$35 billion, have
been signed under this scheme.

The initiative was launched in the northern Thai city of
Chiang Mai in May 2000 as a response to speculative currency
attacks that triggered the 1997/98 Asian financial crisis.

Any changes in the Chiang Mai accord are expected to be
announced on May 15 after a meeting of the ASEAN Plus Three
finance ministers in Jeju, South Korea, on the sides of the Asian
Development Bank annual conference.

3. Oil (2 x 26)

Plan for oil contractors
to offer 10% stake to regions

Fitri Wulandari
The Jakarta Post
Jakarta

The government is considering requiring oil and gas investors to
give state companies in the regions a 10 percent stake in their
business in a bid to increase the regions' share of oil and gas
production.

The draft government regulations on oil and gas upstream
activities require production-sharing contractors to offer the
stakes to the regional companies when they began developing oil
and gas fields.

Ministry of Energy and Mineral Resources oil and gas reserves
director Iin Arifin Takhyan said the proposal would accommodate
growing calls from the regions to share in the country's oil and
gas wealth following the introduction of regional autonomy.

"It is in line with creating a fiscal balance between the
central and regional governments," Iin said during the weekend.

Governors would select regional state-owned companies in their
respective areas to buy the shares.

Iin said regional companies who bought participating interests
would also shoulder a share of the investment costs to develop
the fields. In turn, they would get shares in the oil and/or gas
production business.

However, if no regional state companies expressed their
interest 60 days after the share offer date, contractors would
then offer them to national companies.

The offer would then close six days later if no national
companies showed interest.

"Contractors would not be pushed into offering the (10
percent) stake in the case that there were no interested or
capable regional companies," he said.

Onny Priyadi, the deputy head of Bojonegoro regional
legislative council in East Java welcomed the proposal, saying
the move meant the people would begin to benefit from the revenue
generated from their oil and gas resources.

"People in oil and gas-producing regions remain poor, although
there have been oil and gas projects in their regions for a long
time. That is because the regions have not had the chance to
participate in the process," Onny told The Jakarta Post during
the weekend.

If this continued, it would lead to social unrest as happened
in Aceh or Papua, he said.

Onny said revenue from oil and gas production could be used
for the regions' economic and social development budgets.

A regional company in Bojonegoro had the financial and
professional capabilities to work in the oil and gas sector, he
said.

The company, PT Darma Asri Sejahtera, was already working in
the sector in the area.

With initial capital of Rp 10 billion, the company planned to
make investment in upstream (oil exploration and exploitation)
and downstream (oil refining, fuel retailing and distribution)
activities. It also planned to increase its capital up to Rp 20
billion.

"We can do it because we put professional people who know the
oil and gas business in the company," Onny said.

Onny said the company hoped to get a participating interest in
the Cepu oil and gas fields in the border area of Central Java
and East Java, which is believed to contain huge oil and gas
reserves.

State oil and gas company PT Pertamina has agreed to form a
partnership with U.S.-based energy company ExxonMobil Oil
Indonesia to operate the block.

4. Nokia (1 x 38)

Nokia confident in loyalty to Communicator
JP/13/NOKIA

Finnish cellphone giant Nokia Pte Ltd has been leading the
national market for years. The Jakarta Post's reporter Dewi
Santoso recently talked with the firm's general manager for
Indonesia Hasan Aula on the firm's business plan. Following are
the excerpts of the interview.

Question (Q): How were Nokia's sales last year?
Answer (A): Last year's sales were very good. I cannot give you
the figures in terms of value or volume as they are confidential.
All I can say is that we achieved the sales target.

Q: How many products did Nokia launch last year?
A: We launched 25 products last year, including five CDMA (code
division multiple access) and 20 GSM (global system for mobile
communication) products. Of the CDMA products, the most popular
types are the dual-band Nokia 3585 and the color-display Nokia
3586. Both are popular due to their user-friendly features and at
affordable prices of around Rp 1.7 million (US$200). Of the GSM
products, the camera-equipped Nokia 6600 is the most popular of
all, thanks to its sophisticated technology and its elegant
design, while the image-enabled Nokia 3650 is also on high demand
due to its capability of displaying sharp images.

Q: There are a lot of camera-equipped phones coming out now. Will
Nokia focus on this type of product?
A: No. We shall introduce more camera-equipped cellphones in the
future, but we won't abandon low-end users and will still provide
mobile phones with no cameras.

Q: How many products will Nokia launch this year?
A: We'll launch nine products. In January, we launched Nokia
6850, which is similar to Nokia 6800, except that the new one has
a camera. Next month, we'll launch two CDMA products, Nokia 6585
and Nokia 6225. The latter is equipped with a camera. For youths
who love games, we'll launch Nokia N-gage. For multimedia lovers,
we have touch-screen-equipped Nokia 7700, which will come out in
July. Hi-tech lovers buy 3-G and CDMA-supported Nokia 7600, while
for those who love style, we'll launch Nokia 7200, the first
clamshell product of Nokia in Indonesia. Also, there'll be Nokia
6230, which is as sophisticated as Nokia 6600. And in October,
the market will see the more sophisticated Nokia Communicator,
Nokia 9500, equipped with a camera.

We may have more products to come out, but we don't have the
exact figures, yet.

Q: You just mentioned that Nokia would launch its first
clamshell. Why did Nokia launch a clamshell mobile phone?
A: We decided to launch a clamshell because we see there's a
demand of it.

Q: Are you going to shift focus from monoblock to clamshell?
A: No. We'll keep our focus on monoblock.

Q: One of the market trends now is cellphone combined with
personal digital assistant (PDA). SonyEriccson has launched the
type of product here, which is selling well. Will Nokia launch
the same product?
A: Nokia doesn't see the need to launch such products as Nokia
offers more flexibility and features from its communicators. For
sure, we're going to launch user-friendly phones, and they don't
necessarily have to be highly sophisticated ones. For the time
being, Nokia will not be launching a PDA-equipped mobile phones
as Nokia has its Communicator, which provides better
functionality and more flexibility.

Q: You seem confident with your Communicator. Aren't you afraid
that PDA-equipped cellphones will gnaw at Communicator's market?
A: No, because Communicator users are very loyal and reluctant to
shift to another type as they have become comfortable with it.

Q: What is your sales target for this year?
A: Again, I cannot tell you the exact figure, but if you look at
the penetration of cellular usage in Indonesia, only 8 percent of
the total (220 million) population. It's a small figure as
compared to Malaysia or the Philippines, where around 15 percent
to 20 percent of the population use cellular phones. This means
that we see a potential increase of almost twice than before in
the market.