Govt unveils new reform package

Govt unveils new reform package

JAKARTA (JP): The government introduced a package of
deregulation measures yesterday to improve the country's export
performance and encourage the establishment of more export-
oriented enterprises.

Minister of Industry and Trade Tunky Ariwibowo and Minister of
Finance Mar'ie Muhammad jointly announced the reduction of import
tariffs on 428 items, the allowing of wholly foreign-owned
companies to set up exporting and importing firms, and the
exemption of imported vessels from paying value added tax.

Tunky pointed out that the new package, the announcement of
which was delayed twice, represents only the first phase of a
comprehensive deregulation package to be launched this year.

Exports

Yesterday's measures cover only the manufacturing industry,
trade and finance. They are aimed at encouraging the development
of export-oriented industries, eliminating export and import
barriers, opening export and import businesses to foreign firms
and facilitating the importation of capital goods and raw
materials.

To further develop export-oriented industries, the government
will allow the inflow and outflow of goods between bonded zones,
export processing entreports and Indonesian customs zones. Bonded
zones are industrial sites where goods awaiting re-export can be
stored without having duties charged on them.

Companies are to be granted rebates (drawbacks) for the duties
paid on imported materials and components used not only for the
production of goods for direct export but also for those sold to
bonded zones and export processing entreports for further
processing for export.

The government also withdrew a monitoring fee imposed on
exporters of textiles and textile-related products to countries
which set import quotas. Such a measure is meant to help reduce
the costs of exports.

"The government has eliminated this monitoring fee because it
is its duty to provide such a service and therefore it should be
borne by the government," Tunky contended.

The government, through the state-owned surveyor firm PT
Sucofindo, previously imposed a monitoring fee of Rp 3.03
(US$0.0013) per meter of textiles exported to quota-imposing
countries.

Tunky added that the government would continue to withdraw
levies imposed on textile producers and exporters, including
those related to licensing and fees collected by local
administrations.

The Indonesian Textile Association has listed 35 different
levies, ranging from Rp 10,000 (US$4.35) to Rp 800,000, imposed
on textile and textile-related companies.

To help boost exports, the package also eliminated export
taxes on a number of products, including finished leather, scraps
of aluminum alloy and Cendana wood. Export taxes on crude palm
oil remain untouched.

The measures also allow foreign investors to set up wholly
foreign-owned exporting and importing firms.

"However, wholly foreign-owned importing companies are
permitted to import only goods for further processing by
industrial firms in bonded zones and export processing entreports
for reexport," Tunky added.

He said that as of April, private companies will be allowed to
develop and manage bonded zones, which are formerly the
prerogative of state-owned companies. "We and the Ministry of
Finance are working on the technical details on this," said
Tunky.

Tariffs

When explaining the aspects of the deregulation under his
jurisdiction, Mar'ie noted that the package cut import tariffs by
amounts ranging from 5 percent to 20 percent, covering 428 items
or almost 6 percent of the 7,284 items now subject to tariffs.

He explained that most of the lowered tariffs apply to capital
goods and raw materials used directly or indirectly by export-
oriented industrial firms.

They include trucks, trailers, tractors and a number of
machines as well as raw materials for furniture, leather-based,
agro-based and textile-related industries as well as a number of
light industries.

Imports of machinery and plant equipment by automobile
companies are exempted from duties, Mar'ie added.

"Previously, this facility was granted only to industries
outside the automotive sector," Mar'ie said.

The new package, however, does not withdraw import controls on
119 items, including steel, lube oils, toxic wastes, wheat,
soybean, vegetables, milk, rice, sugar, garlic and cloves.

The new package removes the value added tax on the importation
of all vessels except yachts and cruise ships.

To further empower local shipping companies, the government
also lifted the value added tax on shipping-related services,
including leasing, docking and other port-related services.

"We hope these measures will increase the capacity of national
shipping companies in inter-island and international freight
services," Mar'ie said.

The Indonesian National Shipowners Association (INSA) welcomed
with reservations the eased tax treatment on vessel imports and
shipping services. "These measures should be supplemented by the
reduction of licensing red tape at the sea transport directorate
general," INSA's secretary-general, Barens T. Saragih, commented
yesterday.

He cited the permits which shipping companies have to obtain
for selling or buying ships as an example of unnecessary
bureaucracy.

"It sometimes takes more than one year to obtain a permit to
sell or buy a ship," Saragih complained, questioning why shipping
firms have to get government approvals for such a transaction.

"I cannot understand why the government should intervene in
the selling and buying of ships," he said.

Saragih added that the processing of government permits for
ship loading and unloading also often takes several days to
complete. (team)

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