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.