Government unveils new reform package

JAKARTA (JP): The government yesterday announced a further set of major economic reforms to promote both exports and the competitiveness of the country's economy.

"This deregulation is designed to improve the Indonesian economy's competitiveness in facing economic globalization," Coordinating Minister for Economy and Finance Saleh Afiff told a press conference at his office.

In announcing the deregulation, Afiff was accompanied by Coordinating Minister for Production and Distribution Hartarto, Minister of Finance Mar'ie Muhammad, Minister of Industry and Trade Tunky Ariwibowo and Bank Indonesia Governor J. Soedradjad Djiwandono.

The newest package covers the timetable for further reductions of import tariffs on 1,497 items -- including 385 capital goods items -- of the 7,288 existing tariffed items, simplifying import and export procedures, offering more incentives to export- oriented companies and more flexibility for foreign manufacturers operating in the country.

Hartarto said the reforms prove that Indonesia consistently complies with the free trade principles of the World Trade Organization (WTO), the Asia Pacific Economic Cooperation (APEC) forum and the ASEAN Free Trade Area (AFTA).

"The government is consistent with its deregulation programs, which are being translated into gradual tariff reductions in accordance with our commitment to AFTA, the WTO and APEC. It is very important to answer concerns that Indonesia is not consistent," Hartarto said.

Meanwhile, Minister Mar'ie explained that the new schedule of tariff reductions, to be effective on July 1, reduces Indonesia's unweighted average tariffs by 2 percent to 12.2 percent.

The package also transfers the existing surcharges into the tariff scheme or eliminates them altogether, as mandated by the 1995 Customs Law and also the WTO. Therefore, under the new measures, Indonesia has no more surcharges.

The new package also clarifies the gradual tariff reductions set by the May 1995 deregulation package, which stipulated that all items with tariff rates of 20 percent or lower must be gradually reduced to a maximum of 5 percent by the year 2000 and that all items with tariff rates of over 20 percent must be gradually reduced to a maximum of 20 percent in 1998 and 10 percent by the year 2003.

The package, however, excluded a number of items from the tariff reduction schedule. These include certain farm commodities, automotive products, chemical products, plastic and metal products as well as alcoholic drinks and distilled alcohol products.

Mar'ie said the tariff reduction of Indonesia's farm products has been individually arranged according to its commitment to the WTO, while the tariff reduction of auto products as well as chemical, plastic and metal products has been regulated separately.

Tunky said, under the new package, the government will allow private general importers to import without restrictions certain capital goods and raw materials previously restricted to companies specially licensed to import such goods for their own production processes.

Capital goods and raw materials now open to general importers include electric motors and generators, industrial stoves and displacement pumps, rotation pumps, tractors and soy meal.

Tunky explained that the new package also covers anti-dumping and countervailing measures should Indonesian entities or the economy suffer from unfair trade practices by foreign entities.

He said the government will establish an Indonesian anti- dumping committee to investigate dumping practices or subsidies on the import of goods and recommend the imposition of anti- dumping and countervailing duties.

"These measures are to protect our businesses from unfair trade practices by exporters in other countries, and they are in accordance with WTO provisions," Tunky said.

In an effort to boost the country's non-oil exports, Tunky said, the government will give special tax, customs and banking breaks to exporters of textiles and textile-related products, shoes, electronics, wood and rattan products and leather goods.

"This is a pilot project. That's why we want to limit it to these five sectors. If we expand into other sectors it will be difficult for us to monitor," Tunky said, adding that the five sectors last year contributed some $15 billion or one third of the country's non-oil exports.

Meanwhile, Soedradjad explained that banking incentives for exporters in the five sectors include a more favorable interest rate on rediscount facilities, longer-term usance letters of credit and freedom in deciding the level of fees for opening letters of credit.

Tunky further said that the government will cancel the requirements for exported goods to be inspected by the government surveyor PT Sucofindo, streamline procedures for obtaining certificates of origin for export goods and eliminate export clearance documents for export goods valued up to Rp 100 million (US$42,450).

The government will also ease procedures to obtain permits to set up plants in industrial zones and open the building and operation of export entrepots and bonded warehouses to the private sector.

Foreign manufacturing firms operating in Indonesia will also be allowed to import complementary goods from affiliate companies abroad to sell them in Indonesia.

"However, the amount of their imports must be below that of their exports. This is again to encourage them to boost exports," Tunky said, adding that foreign manufacturing firms are also given dispensation to sell their products directly to wholesalers.

Tunky also announced that the government will ease procedures for the import of waste for use as a raw material by Indonesian industries, as mandated by the Customs Law. (rid)

Editorial -- Page 4

Export -- Page 10