Fri, 13 Aug 2010

The government says it is preparing measures to reinvigorate the industry-based cluster program, which has faced serious obstacles including overlapping land titles and infrastructure bottlenecks.

Industry Minister Mohamad S. Hidayat on Thursday said a regulation was being drafted to provide a legal basis for fiscal incentives for companies with investments in five industrial clusters.

The clusters are located in Riau, North Sumatra, East Kalimantan, East Java and Merauke provinces.

The clusters in the first three provinces were formed specifically for the production of crude palm oil and its derivatives, while the last two were for oil and gas and agriculture products.

“We hope it can speed up the growth of our new industrial zones,” Hidayat said, without providing details of the plan.

Hidayat said the development of the industrial clusters was aimed at improving the competitiveness of Indonesian manufacturers and also key to realizing the government’s plan of creating special economic zones (KEK), which could include the clusters.

“I will soon visit our new industrial cluster in East Kalimantan to check its progress,” Hidayat said, adding that he would be accompanied by Finance Minister Agus Martowardojo.

Apart from fiscal stimulus, Hidayat said, the government would also help to develop infrastructure the industrial zones needed to attract investment, to encourage investment relocations from China and other countries in region.

“We hope upstream and downstream processing industries can be placed in special economic zones,” he said, adding that the government was developing ports near the clusters.

According to the government, a KEK may also include a free trade zone (FTZ), such as the one in place in Batam, Bintan and Karimun Islands. Similar to the industrial cluster program, Indonesian free trade zones are marred with continuing infrastructure support and regulatory problems.

Hidayat said many regulations needed to sustain free trade zones had not been implemented.

For example, he said, a zero percent of tax on luxury goods (PpnBM), including for new cars. This facility has been implemented only in Batam.

“We have agreed to implement the facility for all free trade zones, not only in Batam,” Hidayat said.

The government was also working to resolve land acquisition problems hampering investments in these zones, he said.

“Land disputes are impeding investment. We have to clear the way to provide legal certainty to investors,” he said.

The 2007 Law on Spatial Planning scrapped a loophole through which entities could previously gain exemption from zoning regulations.

“We’d like to make a breakthrough by creating legal certainty on land use,” he said, adding that this certainty was needed for reference in establishing free trade zones in other areas.

Hidayat said he hoped the development of industrial clusters would revitalize Indonesia’s industries. (ebf)