Development of the eastern region

The choice of Biak, Irian Jaya, as the pilot project for the eastern region's comprehensive development program is laudable.

The tax incentives and liberal regulatory procedures will most likely woo domestic and foreign investors. Besides the program, the government should probably also think in terms of:

* Cost of communication. Communication is vital for national unity. Today, a one-minute telephone call to the far eastern region costs about Rp 1,650, plus PPN (value added tax).

In the developed world, relentless technological changes are driving down the cost of telephone calls, and a call from London to New York costs virtually the same as carrying it from one house to the next.

If the cost structure is similar in Indonesia, it is probably time for a retrospection of the policy of distance-based charges by telephone companies. With increasing affluence, people in cities here are spending more time making telephone calls.

When the affordability of the people and businesses of the far eastern region are taken into consideration, there seems to be a social and business justification for economical pricing of long distance calls. This will make it possible to provide distant areas with many of services in terms of information and develop in these regions.

* Subsidized air transportation to this region.

* "Investment allowances" to companies operating in the developed region for investments in the far eastern region. When existing companies diversify and expand their operations and invest in industries in the identified backward regions, they may be allowed to claim investment allowances against the payment of income taxes from the profits of existing companies; the allowances depending on the level of the region's prosperity and the type of industry.

* Substantial reductions/waivers in the personal income taxes of executives taking up jobs in this region.

* Ease in employing expatriates and waiver of expatriate- related costs.

Probably, benefits such as these are investments by the government which, in turn, will bring much higher returns to the exchequer in the long run. These benefits would offset capital costs and the cost of doing business in these regions and attract domestic and foreign investors.

D. PRABHAKAR

Jakarta