Govt to give tax cuts, incentives for businesses

Rendi A. Witular and Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

The government will provide a tax cut facility and other incentives to the business sector as compensation for the increase in utility rates.

The incentives were promised by Minister of Finance Boediono during a meeting between business leaders and Vice President Hamzah Haz and other senior economic ministers on Wednesday afternoon. Boediono said that the tax office was considering reducing luxury tax on some 20 product items.

"This is a fairly good signal although it is not our primary demand. What we fought for is for the government to cancel the utility rate' hikes," Sofjan Wanandi, a businessman and chairman of the National Economic Recovery Committee (KPEN), told The Jakarta Post after the meeting.

He said that among the 20 product items were televisions, mobile phones, food and beverages, most of which were no longer considered luxury items.

Some 150 businessmen under the Indonesian Chamber of Commerce and Industry (Kadin), a powerful business lobby, participated in the meeting, which was also joined by Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti, Coordinating Minister for People's Welfare Jusuf Kalla, and Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

In a press conference prior to the meeting, Kadin chairman Aburizal Bakrie said that in addition to calling for a cancellation in the increase in utility charges, the businessmen were also seeking incentives from the government to help the business sector, hit by various uncertainties and problems at home.

The government raised fuel prices, electricity rates, and telephone charges earlier this month as part of efforts to cut expensive subsidies and help ailing state-owned utilities. But many businesses have complained that the price hikes would cause production costs to increase and create difficulties for them amid the weakening purchasing power of consumers.

During the meeting Dorodjatun told the businessmen that the government could not delay or cancel the increase in utility rates especially now that the government was close to meeting with the country's traditional foreign donors grouped under the Consultative Group on Indonesia (CGI), which will convene in Bali on Jan. 21. He added that the policy was part of a program made in agreement with the International Monetary Fund before the country could end the Fund's economic program at the end of 2003.

The government's planned incentives were announced a day before a joint demonstration planned by workers and employers in Jakarta, which will be the largest demonstration since the protests started three days ago.

Sofjan said that the joint rally would still take place despite the promised incentives.

Elsewhere, Sofjan said that the government also promised to cut bureaucratic procedures at the custom's office to allow export-oriented industries to be able to get a refund within seven days on the duties they paid when importing raw materials.

Currently most companies have to wait too long to get the refund, costing them potential interest on the funds.

Furthermore, the government and the businessmen will set up a joint task force chaired by Dorodjatun and Jusuf to identify problems that have created a high cost economy. This includes the elimination of illegal levies charged by corrupt bureaucrats and hoodlums.

The government, said Sofjan, had also decided to allocate some Rp 10 trillion worth of funds from the state budget to finance an economic stimulus program. The funds would be channeled into fisheries, agriculture and manufacturing.

Details of the compensation and list of high cost items will be discussed further on Friday by the team.