New policy to boost 'the east'

New policy to boost 'the east'

JAKARTA (JP): President Soeharto is considering the introduction of new tax incentives to companies planning to invest in eastern provinces of Indonesia, a minister said yesterday.

"The President is considering new incentives, but he said they must not contradict existing regulations," State Minister of Research and Technology B.J. Habibie told journalists after the first plenary meeting of the Council for the Development of Eastern Indonesia at the Bina Graha presidential office.

The council comprises of 13 ministers, including the Minister of Finance, Minister of Agriculture and Minister of Defense and Security, as well as senior officials.

Habibie, who is also the executive chairman of the council, said that tax incentives are part of the proposals put forward to the President by the council in the one-hour meeting.

Habibie said that additional incentives are required because development in the country's eastern part is more difficult than its other areas.

"There are many hurdles in developing eastern Indonesia because of its remoteness, which can make it expensive for investors to commence businesses," he said.

Underdeveloped eastern Indonesia has become a major concern for policy makers as well as various observers since it can heighten criticism on regional disparity amid the country's overall impressive economic growth.

Tax-free

Habibie, concurrently head of the Agency for Technology Assessment and Implementation, also said the council's proposals include a temporary tax-free status for companies setting up operations in eastern Indonesia.

"The incentives are expected to spur investors to enter eastern Indonesia. Once their businesses have matured, we can begin imposing taxes on them," he said.

It was only last December when the government issued new tax laws, effected in January, which allow investors operating in eastern parts of Indonesia to carry forward losses for up to 10 years.

The other tax incentives offered by the laws include acceleration in asset depreciation and the reduction of the 20 percent withholding tax on after-tax profits of permanent establishments in Indonesia.

Habibie also said that the council had appointed four task forces to formulate policy proposals on environment, human resource development and technology, infrastructure and institutional development.

The council will also take into account existing regional cooperation with other members of the Association of Southeast Asian Nations in making proposals for the development of eastern Indonesia, he said.

He added the council has a team of advisors consisting of former governors of provinces encompassed in eastern Indonesia. (hdj)