New incentives on offer for investment in eastern areas
New incentives on offer for investment in eastern areas
JAKARTA (JP): The government is to offer new tariff and tax
incentives and other facilities to attract more investment in the
eastern provinces, especially Irian Jaya.
Executive Chairman of the Eastern Indonesian Development
Council B.J. Habibie told a gathering of business leaders
yesterday that the government would soon issue three Presidential
decrees to adopt Biak in Irian Jaya as a pilot project to be
promoted as an integrated economic development center to benefit
from the incentives.
"Other districts in the eastern provinces can benefit from the
incentives when they are already promoted as development
centers," Habibie said.
The council announced last month that it would establish such
development centers in 13 provinces in the eastern part of
Indonesia to help bridge the development gap between the western
and eastern provinces.
Habibie, also state minister of research and technology,
explained that such development centers will be treated as bonded
zones and enjoy a number of attractions, including tariff and tax
incentives.
When explaining the planned incentives, State Minister of
Investment Sanyoto Sastrowardoyo, a member at the council, said
companies operating in Biak can postpone the payment of duties
and surcharges on imports of capital goods and raw materials.
In addition, they are not required to pay value-added tax,
luxury taxes or income tax on imports or sales of imported goods
to other companies in Biak.
The companies on the island are also exempted from paying
income tax, based on articles 22, 23 and 25 of the income tax law
No. 10/1994. They can also get reductions from the tariffs stated
in article 26 of the tax law.
Article 22 governs the procedures to collect income taxes.
Article 23 stipulates that the tax rate of 15 percent is
imposed on incomes from dividends, savings interests, royalties,
prizes, rents as well as fees on technical, management,
construction, consultants and other services, paid to local
companies or legal entities.
Article 26 is similar to article 23, except that the income is
paid to foreign companies or legal entities and the tax rate is
20 percent.
Companies operating in Biak can also postpone the depreciation
of assets during their "infant" period of operation. The
government applies a flexible range of depreciation tariffs, from
zero percent to 12.5 percent per annum for fixed assets such as
buildings.
Companies' extension of fringe benefits to their employees are
freed from income tax, based on article 21 of the 1994 income tax
law. Such fringe benefits can be included in the operational
costs of the companies. They can also include any costs for the
development of public facilities and infrastructures in their
operational costs.
Sanyoto explained that the government will simplify
administrative and licensing procedures for companies operating
in Biak.
The government will also give incentives in the areas of trade
regulations, customs, labors, transportation and banking.
Sanyoto reiterated that Biak is a pilot project in attracting
both foreign and domestic investors to the eastern part of
Indonesia.
If the incentives turn out to be effective in Biak, they will
be expanded to other areas designated to be development centers
in other eastern provinces.
Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie welcomed the move, saying that it should attract
investors to flock to the remote provinces.
"However, let's see how they will be implemented. It needs
better coordination among ministries and also the willingness of
local administrations to serve investors," Aburizal said.
Also on hand at yesterday's gathering were Minister of
Transportation Haryanto Dhanutirto, Minister of Forestry
Djamaludin Suryohadikusumo, Minister of Tourism, Post and
Telecommunications Joop Ave, Minister of Agriculture Sjarifudin
Baharsjah and hundreds of business executives. (rid)
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