Incentives offered for Irian Jaya investment

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.