Monopoly curbed, trade tariffs cut

JAKARTA (JP): The government decided yesterday to abolish the National Logistic Agency's (Bulog) right to a monopoly on several food commodities, allow foreign-owned firms to distribute their own products throughout the country and cut import tariffs and export taxes.

The measures, announced jointly by Minister of Industry and Trade Tunky Ariwibowo, Minister of Finance Mar'ie Muhammad and Bank Indonesia Governor J. Soedradjad Djiwandono, followed up Saturday's announcement of a bold move to close 16 insolvent banks.

The new move is part of the country's economic reform package under a multibillion dollar agreement with the International Monetary Fund (IMF).

On the occasion, Soedradjad reassured the general public that the remaining banks could continue operations.

"The public should be rest assured that they can continue to bank with the remaining banks. There is no need to panic. The liquidation process involves 16 banks whose names were announced on Saturday," Soedradjad said, rejecting rumors that more banks would be liquidated.

Tunky said the government would dismantle Bulog's trading monopoly on soybeans, garlic and wheat flour starting Jan. 1, but would maintain the agency's monopoly on rice and sugar.

"These products (soybeans, garlic and wheat flour) can now be imported by general importers, subject to import tariffs that will come into effect Jan. 1, 1998," Tunky said at the State Secretariat.

Dried garlic and soybeans will be subject to a tariff of 20 percent on Jan. 1 and wheat flour a tariff of 10 percent. These commodities are now exempt of import duties.

But tariffs on these commodities will be reduced to 5 percent in 2003," Mar'ie said.

Nevertheless, Bulog will still be the exclusive sole distributor of wheat flour in the domestic market for the next three to five years to help stabilize its price.

"In the end, consumers will receive a government subsidy at an amount equal to the difference between the factory selling price and consumer buying price," Tunky said.

The minister said the government would also abolish the government-set retail price of cement and let the price be formed by the market.

In a bid to attract foreign investment, the minister said the government would free up the domestic distribution sector for foreign-owned companies incorporated in Indonesia.

"Foreign investment companies involved in production are now permitted to act as distributors or wholesalers for their own products throughout Indonesia or appoint other foreign companies as the distributors or wholesalers," Tunky said.

But foreign manufacturing and trading companies would only be allowed to enter the retail sector in 2003, he added.

The government has also allowed foreign trade representatives to set up offices in provincial capital cities.

Foreign companies in the bonded zones are now allowed to sell their products in the domestic market, in the form of components, but with domestic sales limited to 50 percent of realized export value.

New manufacturing and service companies are granted two years of duty-free imports of machinery, equipment and supporting goods and materials.

To further bolster non-oil exports, the government decided to expand preferential export treatment to 18 product groups, from 10 products now.

Export taxes

The treatment also covers iron and steel, automotive components, machinery and machinery components, jewelry, chemicals, rubber, mineral products and plastic sheets.

The export facility was previously limited to textiles and textile products, finished leather, footwear and leather products, electronics, wood and processed rattan, pulp, paper and paper products, processed food, vegetable oil, processed natural rubber, dolls and toys, and frozen fish and shrimp.

Mar'ie said the government cut export taxes on rattan, raw hide leather, processed and raw natural cork, aluminum scrap, iron ore, tin ore, copper ore, silver ore and other mineral ores.

Domestic sales of materials and services to companies producing goods in the preferential export treatment category are now exempt of the 10 percent value-added tax (VAT). In this context, rebate of the VAT for domestic suppliers would be expedited.

The government also scrapped a tax on imported gold bars used to produce jewelry for exports and a VAT on raw materials and services of domestic suppliers for export-oriented firms.

To improve efficiency of the domestic economy, Mar'ie said, the government would also cut import tariffs on certain fish, chemical and metal products.

Import tariffs on certain fish products, currently between 10 percent and 20 percent, would be reduced to 5 percent in 1998 and would be eliminated in 2003.

Tariffs on petrochemicals, such as ethylene, propylene, styrene, polyethylene, polypropylene and polystyrene, would be reduced to 20 percent in 2000 and 10 percent in 2003.

In 1998, tariffs on styrene and polystyrene would be reduced from 30 percent to 25 percent and tariffs on polypropylene and polyethylene from 40 percent to 35 percent, Mar'ie said. (prb/rid)

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