Govt to introduce stimulus for component makers

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.