Wed, 20 Apr 2011

TEMPO Interactive, Jakarta:The government will prepare incentives for Chinese businessmen investing in upstream industries to reduce Indonesia’s dependency on imported raw materials.

However, Coordinating Economic Minister Hatta Rajasa has not confirmed what incentives will be given. An incentive could be given in the form of a tax break. Industry Minister M.S. Hidayat said a tax break could support the construction of a raw material factory.

So far, the majority of the industry’s needs are met by imported products. In the textiles industry, for example, cotton is imported from China. The industry is facing trade deficits with China due to the lack of cotton from Indonesia.

This January - February, cotton imports from China reached US$108.62 million, up from US$ 61.6 million last year. The sector has voiced concern over its flagging revenue following the ASEAN-China free trade agreement which was implemented last year.

Hidayat said that if national component industries were strong, upstream industries would be more competitive. Trade Minister Mari Elka Pangestu said she would support cooperation in the footwear and electronic sectors. “In principle, we want investments in machinery components or raw materials,” she said.

The Industry Ministry will also increase the number of products meeting the Indonesian National Standard (SNI).

Besides the industry sector, Hidayat said that trade supervision would be intensified, especially at the ports. “There are indications that illegal imports occur in major and small ports,” he said.