Lawmakers urge free-trade zone status for Batam
Lawmakers urge free-trade zone status for Batam
Tony Hotland, The Jakarta Post, Jakarta
Lawmakers have criticized the government for being too slow in drafting a law on free-trade zone (FTZ) status for Batam, saying that further delays will harm the investment climate in the industrial island.
Speaking in a discussion on the FTZ issue on Wednesday, members of House Commission V, which oversees industry and trade, said that the commission could do nothing to speed up the deliberation process because the draft was still with the government.
"We produced a draft and submitted it to the government more than a year ago, but there has been no direct reply so far. We've also discussed it at plenary meetings," said commission deputy chairman Irmadi Lubis.
Normally, legislation is drafted by the government to be enacted by the House. Nevertheless, the House may also take the initiative to draft legislation, which is then submitted to the government. The government will then respond and discuss the draft together with the House before enactment.
Commission member Christina Rantetena said that the government had to act quickly before its current tenure expired in October.
"The House still has three more sessions. It (the draft) must be looked into as soon as possible before a new government assumes office ... before the issue becomes overshadowed," said Christina.
She added that the government had formed teams early last year to discuss the draft.
"Ibu Rini said in a meeting two weeks ago that the results from the teams were now with the Ministry of Justice and Human Rights," she said, referring to Minister of Industry and Trade Rini Soewandi.
The industrial island of Batam was declared a bonded zone in 1978. But after decades of operation, Batam is now more like an FTZ as local authorities give greater tax incentives to investors in a bid to boost investment activities. But existing investors are still worried that the government might suddenly change the current FTZ benefits. In a bid to attract more investment, the government has been under pressure to grant FTZ status, but for years the government has failed to complete the drafting of the law.
FTZ status would enable companies on Batam, located some 20 kilometers from Singapore, to import goods without paying customs duties and taxes, pending their eventual processing, transshipment or reexportation.
But earlier this year the government instead issued a decree that allows it to impose value-added tax (VAT) and luxury goods tax on certain products sold on the island starting Jan. 1. This has also been criticized by businesspeople.
The decree has created confusion among businesspeople because at the same time the government is also preparing an FTZ law that is supposed to terminate such tax treatment.
Many analysts say that the new decree might even deter investors from the island, which could affect the workforce if investors decided to relocate or withdraw their businesses due to legal uncertainties.
The decree stipulates that the taxes are applied on automotive, cigarette and liquor companies, while electronic products will also be subject to similar taxes in March. After that, they are to be imposed on other products. The types of product affected will be determined during a six-month period at the outside.
Trade expert Heri Mulyono said that the obscure definition of electronic products and the "other products" statement had caused confusion and panic among business players.
"People have started to worry that even home appliances will probably be covered by tax too. The confusing explanation about "other products" had also made prices higher because producers started increasing their prices due to speculation on the tax imposition," he said.