Exporters in bonded zones want incentives restored

Adianto P. Simamora, The Jakarta Post, Jakarta

Industrial estate operators urged the government to restore incentives for exporters operating inside bonded zones, and exempt them from a slew of local regulations issued since the dawn of local autonomy.

Association of Industrial Estates chairman Rizal Bahroni said the attraction of operating in a bonded zone had disappeared since local autonomy took effect last year.

"Some 20 companies have left bonded zones and another 20 are considering to reducing their operations due to the impact of local regulations and the uncertainty over incentives from the government," Rizal said.

In 1989, the government granted a number of industrial estates bonded zone status. This means that export-oriented companies could import raw materials or capital goods used for production tax free.

The government also offered such firms a one-stop export document and permit service.

However, the government has now tightened up the list of goods that may be imported tax free into bonded zones, while new regulations issued by local governments have diluted the remaining incentives, said Rizal.

"Today, there are no set policies for incentives as the government also imposes tax on some raw materials," he claimed.

In addition, he said, exporters faced various levies imposed by local administrations resulting in the loss of any benefits arising from the one-stop service policy.

Rizal said he had brought these problems to the attention of the Crisis Center, a recently established body under the Ministry of Industry and Trade tasked with seeking solutions to various problems faced by business.

Data supplied by his association shows that the country has eight bonded zones. They are Besland Pertiwi in Cikampek, West Java, Cibinong Center Industrial Estate in Cibinong, West Java, Megalopolis Industrial Development in Karawang, West Java, Lamicitra Nusantara in Semarang, Central Java, Dharmala Ngoro, East Java, Surabaya Industrial Estate Rungkut, Pasuruan, East Java, and Lamhotma Medan in South Sumatra.

Rizal added that Indonesia needed to maintain the competitiveness of its bonded zones, or otherwise companies would relocate their operations to neighboring countries.

"Even countries in this region with better facilities, such as the Philippines, Vietnam, and Taiwan, are offering tax incentives to attract investment," he said.

Indonesia's export sector has been hit hard by the country's adverse business climate and a prolonged slump in the global economy.

Among the recurrent problems facing investors are endemic corruption, security worries, labor strife and the absence of a credible legal system.

Exports revenue contributes some nine percent to growth in the economy, as measured by its gross domestic product (GDP), which is the annual value of goods and services Indonesia produces.