Monopoly curbed, trade tariffs cut

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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