JP/13/FISKAL

JP/13/FISKAL

Component duty cuts worry local suppliers

Zakki P. Hakim
The Jakarta Post/Jakarta

Minister of Industry Andung A. Nitimihardja announced on Monday
significant import duty cuts on parts and components for public
transportation vehicles in a move he says will reduce the impact
of the recent fuel price hikes.

However, local industry players and a legislator saw the move
as a setback that could hamper the country's automotive and
components sectors.

Legislator Zulkieflimansyah said the move contradicted the
government's own strategic plan for developing Indonesian
industry.

"The move makes it inevitable that our industries will become
mired in a long-term dependency on foreign countries," said the
member of the House of Representatives' trade and industry
commission.

Ahmad Safiun, chairman of the Federation of Indonesian Metal
and Machine Industry Associations (GAMMA), said the government
should have provided additional incentives to local manufacturers
to produce parts and components rather than encouraging imports.

"The government could have provided tax cuts and other
incentives to local parts makers," he told reporters after the
announcement.

Following the recent 30 percent increase in fuel prices,
public transportation operators responded by increasing their
fares. The government said that providing tax relief for
transportation operators importing parts and new buses would
prevent excessive transportation fare hikes.

"Encouraging operators to buy imported parts and buses has
nothing to do with mitigating the effects of the fuel price
rises," Safiun said.

Moreover, he said, the government could have encouraged parts
importers to avail of the existing import tax cut facility
provided for under the ASEAN Free Trade Agreement.

The facility, known as the Common Effective Preferential
Tariff (CEPT) scheme, allows members of the Association of
Southeast Asian Nations to import goods, including automotive
parts, from fellow members with import duties of between zero and
5 percent.

Anggito Abimanyu, head of the Ministry of Finance body
responsible for tariffs, said the import duty cuts were needed as
the imports were expected to come from China, and would thus be
outside the CEPT scheme.

Andung defended the move, saying the import duty cuts were
temporary and based on a quota system, and so would not hurt
local industry.

"We will restore the import tariffs after 12 months, or sooner
depending on when the quotas have been met," he said, adding that
the new tariffs went into effect on March 10.

The government has cut import duty on clutch assemblies, timing
belts, wheel bearings, transmission assemblies and engine blocks
for public transportation vehicles to zero from a previous range
of between 0 and 15 percent.

Chassis fitted with engines for buses have had their import duty cut
to 5 percent from 40 percent, while completely knocked down buses
and commercial vehicles have had their import taxes cut to 5
percent from 25 percent.

The government has also slashed import duties on completely
built up buses to 5 percent from 40 percent. But the import quota
is restricted to 1,150 units.

The secretary-general of the Indonesian Association of
Automotive Assemblers (Askarindo), Soeseno, demanded that the
government stick to its decision to apply the duty cuts for a
limited period and to impose import quotas.

"Past experience shows that once the door to imports is
opened, it stays that way, even after the regulations say it has
been closed," said Soeseno, whose association now has only around
60 members compared to 300 in the early 1990s.