Poor infrastructure affects N. Sulawesi economic zone

By Christiani S.A. Tumelap

MANADO, North Sulawesi (JP): The delayed construction of new transportation facilities in North Sulawesi has impeded the development of the Manado-Bitung Integrated Economic Zone, the head of the zone management team said.

S.H. Sarundajang said without adequate infrastructure, no large investors would establish businesses in the area.

"The simple licensing and tax incentives offered to investors are terrific. But they still need good infrastructure such as wider roads and better airport and harbor facilities to ensure their businesses run fast and well," he told visiting members of House of Representatives Commission V for trade, industry, investment, cooperatives and small and medium-size entrepreneurs.

The government initially planned to construct new arteries connecting Manado to Bitung and other areas to facilitate the transportation of containers. It also planned to expand the runway and terminal facilities at Sam Ratulangi Airport in Manado to enable it to serve wider-body aircraft like the Boeing 747, and build a 15,000 square-meter cargo consolidation center at Bitung Harbor.

Sarundajang, who is also the mayor of Bitung, said the zone's management could not construct the required infrastructure on its own because its capabilities and tasks were limited to promoting the zone and facilitating investment in the area.

The development of the zone relies on the government, he said, adding that to support the zone's initial activities the government injected about Rp 4 billion (US$571,428) in 1999.

The 2,500 square-kilometer Manado-Bitung Integrated Economic Zone, which covers Manado, Bitung and 19 districts in Minahasa, was inaugurated in September 1998 as part of the government's efforts to promote economic activity in eastern Indonesia.

There are 13 other economic zones in Indonesia's eastern provinces, including Biak in Irian Jaya, Sanggau in West Kalimantan, Ende in East Nusa Tenggara, Seram in Maluku and Pare Pare in South Sulawesi.

In an attempt to attract foreign direct investment in the areas, the zones' managements are authorized to provide incentives, including a simplified licensing process, free import duty for the import of raw materials for export-oriented production and basic machinery and equipment and tax facilities, including up to 10 years loss carry-forward, the reduction of income tax on dividends, free luxury sales tax for the import of capital goods as well as accelerated depreciation and amortization for income tax purposes.

Sarundajang said business potentials in the Manado-Bitung economic zone included agribusiness, industry, fisheries, mining and tourism.

He said agriculture and agroindustry offered ample opportunities, with the production of 276,924 tons of coconuts per year, 8,478 tons of clove per year, 300 tons of vanilla per year and 264,000 tons of fish per year.

The economic zone, however, has attracted no new investors since it began operating eight months ago despite an aggressive overseas promotional campaign, he said.

Mindo Sianipar, a commission member from the Indonesian Democratic Party of Struggle (PDI Perjuangan), said the management of the economic zone was ill prepared to fulfill its tasks.

"The zone's management does not even has its own office," he said.

A commission member from the Golkar Party, Djelantik Mokodompit, said religious conflicts in nearby Maluku deterred foreign investors from entering the zone.

Hundreds of refugees from North Maluku are currently being sheltered in Bitung.

Djelantik said the failure to attract investors was also due to confusion over whether the zone's management or the local government would have authority over the zone when Regional Autonomy Law No. 22/1999 is put in place in 2000 or 2001.

The law, along with Intergovernmental Fiscal Balance Law No. 25/1999, will give provincial administrations greater autonomy in managing their affairs and a greater share of the revenue generated in their territory.

Sarundajang said the local government's authority could overstep the jurisdiction given to the management of the economic zone by the central government.

"I think the provincial administration should just let us run the economic zone as was planned by the government to avoid conflicts of interest," he said.