Batam exempt from VAT, luxury taxes

Batam exempt from VAT, luxury taxes

JAKARTA (JP): President B.J. Habibie will exempt Batam island
in the Riau archipelago from value added and luxury taxes in a
bid to boost investment in the special industrial zone, an
official said yesterday.

Ismeth Abdullah, head of Batam Development Authority, told
journalists after reporting to President B.J. Habibie that the
planned tax exemptions were intended to help turn Batam island
into a more attractive industrial site for investors.

"It has now been agreed to abolish value added and luxury
taxes so that the island can become a true industrial zone," he
added.

Ismeth said the reintroduction of value added and luxury taxes
by the finance minister in March had made locating on Batam
island a much less attractive proposition for foreign investors.

He said the island, which is located 15 kilometers south of
Singapore, earned the nation US$4.5 billion in foreign exchange
last year and employed a workforce of 135,000 people.

Ismeth recently replaced Jusuf Effendi Habibie, a brother of
President B.J. Habibie, as head of the Batam Development
Authority. J.E. Habibie resigned from the post soon after his
brother became president. B.J. Habibie himself is a former head
of the Batam Development Authority.

Meanwhile, State Minister of Investment Hamzah Haz revealed on
Tuesday that his office had cut some of the bureaucratic
procedures that foreign investors must go through to invest in
Indonesia.

Foreign investors, he said, are no longer required to get a
principal license from the governor of the province in which they
plan to locate.

Furthermore, investors will no longer be forced to locate in
designated industrial estates. From now on they are free to
choose where to build their plants.

He added that investors were no longer required to get a
letter of recommendation from the directorate general which
supervises the sector in which they operate.

And most importantly, Hamzah Haz said, the government would
grant 10 year tax holidays to foreign investments which met
certain criteria.

The minister also said he had devolved responsibility for
licensing and offering incentives to attract domestic investments
to provincial governors and provincial offices of the Investment
Coordination Board (BKPM).

"All governors must have business awareness so that they can
attract as many investors as possible to their provinces to
improve their people's welfare," he was quoted by Antara as
having said in Medan, North Sumatra.

The minister called on all governors and provincial
representatives of BKPM to monitor the implementation of
investments which they licensed. (prb/rid)