Incentives needed to push investment in eastern regions
Incentives needed to push investment in eastern regions
Rendi A. Witular, The Jakarta Post, Jakarta
State Minister for Eastern Indonesian Development Manuel Kaisiepo
said on Wednesday tax incentives were badly needed to attract
investors to eastern Indonesia and accelerate economic
development in the region.
He said incentives must be offered particularly for the
fishery and agribusiness sectors.
"Do not expect an acceleration of economic development in the
region if we cannot accommodate the needs of investors," he told
lawmakers during a hearing with House of Representatives
Commission IV for transportation and communications.
Manuel said the investment incentives should include a tax
holiday and soft loans from the banking industry.
He said his office had proposed the incentives but that other
related ministers had so far rejected the plan.
President Abdurrahman Wahid signed a decree in 2000 to provide
tax incentives for investment in eastern Indonesia, but then
canceled the policy in response to strong opposition from
Ministry of Finance. The ministry said the decree would violate
existing law, which stipulates that no region can be granted
exclusive tax breaks.
The decree contained exemptions on value added taxes, income
taxes and import duties for foreign investors for a duration of
eight years.
The eastern part of the country is widely regarded as lagging
far behind western Indonesia, particularly Java, in economic
development.
Accelerating economic development in eastern Indonesia is seen
as crucial in helping to ease rising separatist demands in the
region.
Manuel said there should be a consensus on the part of banks,
businesspeople and government officials to accelerate development
in eastern Indonesia.
Elsewhere, Manuel explained that small and medium-scale
companies in the region were having difficulties expanding their
businesses because bank loans were hard to get.
In September last year, leading banks made an agreement with
the minister to give full authority to their local branches to
extend loans to businesses in eastern Indonesia, in a move that
was to help promote economic growth in the region.
However, Manuel said there were few signs that more money was
flowing from the western part of Indonesia to the eastern part
via the banks.
About 80 percent economic activity in the region is dominated
by small and medium enterprises, mainly in the fishery and
agribusiness sectors.
During the same hearing, a deputy to the minister of maritime
affairs and fisheries, A.R. Maklin, sought the support of
lawmakers to upgrade the Makassar Port in South Sulawesi and the
Bitung Port in North Sulawesi to become international hubs
serving the eastern regions.
These hubs are necessary to accelerate economic development in
eastern Indonesia, he said.