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)