The Finance Ministry regulation exempting duties on selected imported machines for industrial development, issued Monday, met with criticisms from local business
The regulation, which will come into effect on Dec. 16, effectively provides zero import duties on machines for manufacturers and several business service sectors including tourism and culture, transportation, public health care services, mining, construction, telecommunications and logistics services in ports.
The regulation stipulates manufacturers are eligible for exemption from import duties on condition that they finish their projects to expand their factories by at least 30 percent of additional capacity within a maximum of two years after receiving the concession.
Manufacturers can claim the reimbursement of the import duties already paid by making a claim to the Investment Coordinating Board (BKPM) after completing their expansion projects, it says.
However, the Indonesian Machine Tool Industry Association (Asimpi) criticized the regulation Wednesday, saying the government should have scrapped import duties on machine components.
"With the duties exemption on imported complete machines, the government . will in fact kill the growing domestic machinery industry," Asimpi chairman Dasep Ahmadi said Wednesday.
Under the new regulation import duties on machine components would remain between 5 percent and 15 percent, according to Dasep.
Dasep said he suspected that the decision was in line with the Association of Southeast Asian Nations-China free trade agreement (AC-FTA), which will come into effect early next year. "Our machinery industry, which is running on 50 percent capacity already, will collapse when the AC-FTA becomes effective," he said.
Other countries, he said, are still imposing import duties on complete machines: between 5 percent and 17 percent in China, between 6 percent and 10 percent in Taiwan, between 7.5 percent and 12 percent in India, 14 percent in Brazil and between 2.4 percent and 4.4 percent in the United States.
"They exempt import duties on machinery components to support the performance of their domestic machinery industries," he added.
Contacted separately, the Finance Ministry's head of fiscal policy agency Anggito Abimanyu rejected this argument, saying "the regulation doesn't relate to *the FTA* directly".
"The point is that *the government wants to* encourage investment," he told The Jakarta Post.
Industry Ministry director general for metal, machinery, textile and miscellaneous industries Ansari Bukhari said he had not yet been informed of the new regulation.
"I don't know which tariff lines have been exempted under the Finance Ministry regulation. I'll check that first," said Ansari.
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