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.