Govt to introduce stimulus for component makers
Rendi A. Witular, The Jakarta Post, Tangerang
The government is considering introducing another stimulus package this year to lure foreign component makers into the country to support the development of the country's manufacturing industries, such as the electronics and automotive industries.
Minister of Industry and Trade Rini M.S. Soewandi said on Thursday that the government would cut the country's dependence on imported components and as such encourage electronics firms to produce high-tech products and automotive manufacturers to expand or open plants in the country.
"We are considering offering a stimulus package to investors who are engaged in making components to lure manufacturing companies to invest in the country," Rini said.
Rini's plan was voiced on the sidelines of the inauguration ceremony of the expansion to the manufacturing plant of PT LG Electronics Indonesia (LGEI).
Recently, the government has launched a stimulus package which includes the elimination and reduction of luxury tax on some 45 product items, mainly electronics, to help reduce their production costs. This in turn will enable them to compete with cheaper smuggled products.
Rini said the ministry had currently set up a team tasked to study the kinds of stimulus packages suitable for component investors.
The team, said Rini, consists of officials from her ministry and the Directorate General of Taxation and the Directorate General of Customs and Excise.
The stimulus packages, said Rini, could include the reduction or even exemption of import duties and taxes on raw material needed by the component manufacturers.
Furthermore, the government would also plan to build more bonded zones that offer attractive facilities and incentives for component manufacturers.
Analysts have said many giant automotive makers have been discouraged from opening assembly or manufacturing plants in Indonesia because Indonesia does not have a strong component manufacturing industry to support their production.
The electronics industry has also been discouraged from producing high-tech products due to the absence of high-tech component makers in the country.
To lure component makers, Rini plans to visit Japan this month to meet with the country's microchips and dynamo producers and convince them that Indonesia is a good place for investment.
President Director of LGEI Young Ha Kim agreed that Indonesia should strengthen its component manufacturing sector in order to encourage more electronics makers to come to the country and the existing producers to make high-tech products.
He said Indonesia was still attractive for investment and LG was still committed to investing in the country, which was evidenced by the company's decision to expand its refrigerator manufacturing plant in Legok, Tangerang, Banten.
LGEI produces TVs, refrigerators, VCRs, air-conditioners and washing machines in Indonesia.
He said the local content of its products had thus far reached between 60 percent and 70 percent. The company expected to boost its local content by up to 90 percent in order to lower their prices.
The company invested US$9 million to expand its refrigerator plant to meet increasing demand from the local and international markets, he said
The company's refrigerator exports increased by 100 percent from 50,000 units in 2001 to 100,000 units last year. This year, LG has an export target of 300,000 units.