Manufacturers prioritized for tax holiday

Manufacturers prioritized for tax holiday

JAKARTA (JP): Minister of Trade and Industry Tunky Ariwibowo
said yesterday that the component industry will have priority to
receive tax incentives under the government's policy to promote
investments for the development of integrated industries.

Speaking at a coordination meeting on investment, Tunky said
that tax incentives are necessary for the component industry,
which will support the manufacturing of finished products, such
as machinery. Although not present inside the meeting room,
reporters were able to hear the speakers at the meeting,
including Tunky, who made his announcement regarding the
component industry behind closed doors.

The meeting, attended by chiefs of provincial offices of the
Investment Coordinating Board, was opened yesterday by
Coordinating Minister for Production and Distribution Hartarto.
State Minister for Investment Sanyoto, Minister of Tourism, Post
and Telecommunications Joop Ave and State Minister for Agrarian
Affairs Soni Harsono were the featured speakers.

When asked by reporters after the meeting whether the
component industry would receive a priority in enjoying the
recently-announced tax holiday, Tunky refused to confirm or deny
his earlier announcement.

On July 11, the Ministry of Finance announced that the
government, under Government Regulation No. 45/1996, will award a
tax holiday for newly operational companies in "certain"
industrial sectors, exempting them from income tax for up to 10
years. The regulation did not explain the names of the "certain"
industrial sectors, but said that a special team would determine
the them.

"We want to develop an efficient industry that has a
competitive edge to face the era of trade liberalization under
the ASEAN Free Trade Area (AFTA) agreement, the Asia Pacific
Economic Cooperation (APEC) forum and the World Trade
Organization (WTO)," Tunky said yesterday.

"Our strategy to deal with global trade is to depend on a
market mechanism in which private sector companies play key
roles. To realize the strategy, we will choose specific
industries which will receive a priority to get incentives," he
added.

"In this case, we want industrial plants to be able to survive
with the existing tariffs," he said. "We have set the schedules
of tariff reduction until the year 2003."

Tunky, however, confirmed that newly established plants in
certain industrial sectors would be given a tax holiday designed
to support their growth.

When asked which sectors will enjoy such incentives, Tunky
said: "I cannot disclose them now, because it may give misleading
information to the public. The government -- in this case, the
Ministry of Trade and Industry -- is still selecting the types of
the industries to get the tax holiday."

The other two ministers involved in the meeting were Minister
Sanyoto and Minister of Finance Mar'ie Muhammad. None of the
three ministers disclosed the results of the meeting.

"We will propose the selected industries to the `tax holiday
team', which is headed by Coordinating Minister for Economy and
Finance Saleh Afiff," Tunky said.

"How can I tell you if the team has yet to meet?" Tunky told
journalists after attending a meeting at the Finance Ministry.

Meanwhile, Minister Joop said that his office will seek
agreement from the cabinet on incentives for investments in
tourism projects in eastern provinces.

"If necessary, incentives for tourism projects in Java and
Bali are abolished to drive investors to move to the east." Joop
added.

Sanyoto meanwhile said that as of July 15, the government had
approved 10,164 domestic investment projects worth Rp 448.5
trillion (US$190 billion) since 1967 and 4,519 foreign investment
projects worth $164.3 billion.

The realization of investment plans as of the end of last year
reached 73 percent for domestic investments in terms of the
number of projects, or 44 percent in terms of value, while the
realization of foreign investments was 71 percent in terms of the
number of projects, or 55 percent in terms of value.

During the first six-and-a-half months of this year, domestic
investment approvals already reached Rp 70.6 trillion for 510
projects. The investment figure was higher than the Rp 69
trillion approved for the entire year of 1995.

Foreign investment plans approved in the period between
January 1 and July 15 were recorded at $21 billion for 611
projects.

Sanyoto also disclosed yesterday that as of July 15, Japan was
recorded as the largest foreign investor, with cumulative
investments of $31.9 billion. It was followed by Britain, with
$28 billion, Hong Kong with $18 billion, Singapore with $13
billion and the United States with $12 billion. (alo)