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)

Editorial -- Page 4

Export -- Page 11

Comments -- Page 12