Incentives offered for Irian Jaya investment

By Berni K. Moestafa

JAYAPURA, Irian Jaya (JP): Minister of Industry and Trade Luhut Pandjaitan has proposed offering incentives to investors in Irian Jaya to stimulate economic development in the most eastern part of Indonesia.

He said the incentives were needed to lure investors to Irian Jaya, considering the province's underdeveloped infrastructure.

"The challenging conditions (in Irian Jaya) are a feat to any investor and that calls for incentives from the government," Luhut told The Jakarta Post on Tuesday during a visit to the province.

He said the government might, for instance, consider offering tax holidays to companies in Irian Jaya, or maintain fuel subsidies for their businesses.

"We must look for the right incentives," he said.

Luhut said he would work with the Ministry of Finance to discuss the possibility of offering incentives.

"We need to coordinate and explain the conditions to them (the Ministry of Finance). And they will have to see for themselves how difficult things are here," he said.

According to Luhut, people often thought that investment conditions in Irian Jaya were similar to those in Java, Sumatra or Bali.

But investors in Irian Jaya often had to build their own infrastructure, such as roads and even airports, as well as having power generators, he said.

He said large companies like gold mining giant PT Freeport Indonesia might be undaunted in the face of poor infrastructure in Irian Jaya, however local companies interested in the province should receive the government's support.

Calling present local investors in Irian Jaya pioneers, he said they were entitled to receive incentives from the government.

"They build airports and roads, why shouldn't they get any incentives?"

He pointed out that fishing and forestry concern Djajanti Group, which was among the few local companies to invest in Irian Jaya, had made a positive impact on the province's economy.

The business group currently has eight fishing companies, three of which are located in Irian Jaya with eight in the province of Maluku.

Djajanti has an investment of US$2 billion in its subsidiaries while employing 50,100 workers and operating 660 fishing vessels.

However, security problems in the two provinces have prompted many of Djajanti's skilled fishermen to leave their work, which caused a sharp decline in their fishery output.

A communal war between religious followers has beleaguered Maluku since 1999, while security in Irian Jaya has deteriorated along with increasing calls for the province's independency.

Djajanti also faces a sluggish global fish market, as prices of, among others things, tuna has dropped to $400 per ton from $1,200 per ton, according to the company.

The company recorded $194 million in sales during the first nine months of 1999, down from $305 million in 1998.

Luhut, who visited two of the company's fish processing plants, said the government should support export-oriented companies that were in difficulty.

"Especially if we are to boost our foreign exchange earnings and create jobs," he said.

Djajanti president Sujono Varinata expressed hope that the government might offer incentives to local companies investing in Irian Jaya.

"The government has never offered any incentives to investors in this province before," Sujono said, adding that it should turn Irian Jaya into a bonded industrial zone.

During his visit to Irian Jaya, Luhut also met members of the local business community and officials of the provincial council.

Luhut, according to local government officials, is the first minister of industry and trade to visit Irian Jaya in over 30 years.

Meanwhile, deputy governor of the economy and development of Irian Jaya Herman Monim blamed worsening security conditions as the reason why investors had become more reluctant to invest in the province.

"At present, security is the most crucial factor to attract foreign investors," he said, adding that even riots in Jakarta were effecting the province's investment climate.

He said that aside from the fishery sector, the province was ideal for investing in coffee, palm oil and cocoa plantations, and that the mines and energy industry was particularly attractive for foreign investors.

The province will soon see the beginning of a $1.5 billion Tangguh gas project that will produce six million tons of liquefied natural gas per year.

The project is slated for development next year, with state oil and gas company Pertamina and production sharing partner BP Amoco Indonesia operating the gas fields.