Government expands special export category

JAKARTA (JP): The government has included food, paper, rubber, fish, vegetable oils and toys into the categories of industrial products eligible to receive export tax and nontax incentives.

This brought the number of eligible product categories to ten after four were announced last year, Industry and Trade Minister Tunky Ariwibowo said yesterday.

Tunky told newsmen the six additional categories of products were basically resource-based industries with a very high local content.

"Exports by these industries have a promising outlook... Their high local content will also help to curb the country's imports," he said.

The six categories are pulp and paper products, processed food, vegetable oils, processed rubber, toys, fish and frozen shrimp.

The four categories announced last year were textile and textile products, electronics, wood and rattan products, shoes and leather goods.

The incentives are designed to boost nonoil exports. Nonoil export growth has declined in recent years.

Under a ministerial decree issued last June, manufacturers of selected export commodities are entitled to various incentives. These are credited import duties or faster drawbacks or repayments of import duties paid on imported raw materials and on value-added tax paid on inputs bought locally.

Customs office post-audits must be done at least a year after goods are exported and harbor authorities may process export documents without having to use a foreign exchange bank.

Special desks and services are provided for document checking.

Banking incentives for exporters include more favorable interest rates on rediscount facilities and longer-term use of letters of credit.

Last month Bank Indonesia, the central bank, cut the discount rate for special exporters to Singapore Inter-bank Offered Rates (SIBOR) plus one point.

The central bank also allows banks that issue U.S. dollar export drafts to importers to ask the central bank to pay them in U.S. dollars. The central bank normally rediscounts export drafts in rupiah.

The central bank also extends its rediscounting facilities to producers that supply goods to exporters which already have special status.

The rates for bank drafts issued by banks for suppliers are based on the central bank's three-month money market securities' cutoff rate plus or minus a set margin. The margin was set at minus 0.50 percent last month.

An eligible company is entitled to special export facilities for two years. This entitlement may be extended provided the company meets government requirements.

Tunky said companies eligible to receive the facilities had to meet several requirements. These include the need for the company to be clear of tax, customs and debt-related problems.

Eligible firms must also have a clear office or factory address and a taxpayer registration number.

Tunky said producer exporters should send their applications to the Director General of Technical Supervision while nonproducer exporters should send theirs to the Director General of International Trade.

Tunky said the number of companies to receive these facilities would depend on how many applied.

In the four categories announced last year the government has listed 334 eligible exporters.

Tunky attributed the decline in nonoil exports on slackening economic growth in many of Indonesia's trade partners and on the emergence of new exporting countries.

"New exporters manufacture similar products and, like Indonesia, their industries are also labor intensive," he said.

But Indonesian inefficiency is also a problem.

"We are still suffering from the high cost of doing business in Indonesia, although we have taken steps to reduce this by implementing deregulations and debureaucratization measures," he said.

He said that in the future the government would probably implement deregulation measures one at a time rather than in packages has been done since 1983. (pwn)