Minister hopes tax breaks will woo foreign investors

Minister hopes tax breaks will woo foreign investors

JAKARTA (JP): State Minister of Investment Sanyoto
Sastrowardoyo said yesterday that the recently introduced tax
holidays should attract new foreign investment.

"We are facing tight competition from our neighbors in
attracting foreign investment. The tax holidays will help boost
opportunities for investors," Sanyoto told journalists after
meeting President Soeharto.

Sanyoto said that many investors had expressed interest in the
industries which will benefit from the tax breaks, even though
the government has not decided what type of companies will
qualify for them.

After a 13 year abstention, the government earlier this month
reintroduced tax exemptions for newly operating companies in some
industries. The qualifying companies will be exempt from paying
income tax for up to 10 years. Companies operating outside of
Java and Bali will be exempted for 12 years.

The industrial sectors to receive tax holidays will be
determined by President Soeharto based on recommendations by the
Team for Assessment of Tax Facilities for Certain Industries, of
which Sanyoto is a member.

Sanyoto said that companies qualifying for tax breaks would
have to produce raw materials for industry, export goods, farm
commodities or strategic, high technology goods.

The tax holiday is expected to attract large multi-national
companies to invest, Sanyoto said. "If the large ones come here,
the small ones will follow."

Sanyoto reported that the government approved 634 foreign
investment projects worth US$21.8 billion from Jan. 1 to July 27,
1996, compared with 475 projects worth $28.7 billion in the same
period of 1995.

"The reason (for the drop in value) is that we had approved
seven oil refinery projects last year which were worth a lot," he
said.

Approved domestic investments were worth Rp 75.3 trillion ($32
billion) for 546 projects from Jan. 1 to July 27, 1996, compared
with Rp 69.8 trillion for the whole of 1995.

Meanwhile, the investment realization rate has improved to
53.4 percent for foreign investment and 47.9 percent for domestic
investment.

Sanyoto also reported that his office had revoked 88
investment licenses from Jan. 1 to July 27, 1996. He said the
revocations occurred because the investors had failed to meet
their plans.

According to an existing regulation, investment licenses may
be revoked if investors fail to start their projects within three
years of their licenses being issued.

According to the Investment Coordinating Board, 63 of the
revoked licenses belonged to domestic investors and 25 to foreign
investors. The planned investment value of the 63 domestic
investment projects was Rp 900 billion (US$384 million), while
that of the 25 foreign investments was $458 million.

He said the 25 foreign investment projects were canceled for
the following reasons: Nine had trouble sourcing finance, five
were "desperate," one had no proper planning, one had trouble
with its shareholders, two had transferred their assets to other
projects, two had marketing problems, two faced possible
bankruptcy, one was operating outside of its license (Dragon
Bank) and one had an expired forest concessionaire's license.
(rid)