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)