Smuggled electronics still rampant at Glodok

Smuggled electronics still rampant at Glodok

Dewi Santoso, The Jakarta Post, Jakarta

The government's decision to lower luxury taxes last year
evidently has not stopped the influx of smuggled electronics
products into the country, although it has helped local producers
to gain ground.

During a recent visit to the country's largest electronics
center in Glodok, West Jakarta, The Jakarta Post found vendors
offering a great number of smuggled products, including
handycams, LCD-monitors, television sets and home theater
systems.

Many vendors in Glodok sell electronics of a similar type and
brand at different prices. Smuggled products are cheaper than the
legally imported ones. Unlike the legal ones, which are
guaranteed by the manufacturers, smuggled products are only
equipped with a limited warranty from shop owners.

One store visited by the Post, for instance, was selling a
SONY-DCR-DVD101 handycam at two different prices. The smuggled
one is priced at Rp 6.65 million (US$782.35), around Rp 1 million
lower than the legal one.

Another electronics store offers the Pioneer HTP-230-S/K home
theater set at Rp 3.8 million (US$450) with a one-year warranty
from Pioneer. A smuggled one of a similar type is available for
Rp 300,000 less, but with a one-year warranty from the store, not
from Pioneer.

The government introduced a luxury tax break and tax reduction
for selected electronics in January last year in an effort to
curb smuggling, by making it less profitable, and thereby
boosting sales of locally produced items. This is also expected
to attract new investment in the country's electronics industry.

The selected electronic goods that were exempted from the
luxury tax included televisions measuring up to 21 inches,
washing machines of up to a 6-kilogram capacity, refrigerators
with a maximum capacity of 180 liters and air conditioners with a
maximum capacity of 1 horse power (PK).

Others that benefited from the luxury tax reduction included
21-inch to 42-inch televisions (from 30 percent and 20 percent
respectively to 10 percent), washing machines with a capacity of
six kilograms to 10 kilograms (from 20 percent to 10 percent),
and air conditioners with a capacity of between 1 PK and 2 PK
(from 20 percent to 10 percent).

The luxury tax break and reduction, according to Indonesian
Electronics Association (Gabel) chairman Lee Kang Hyun, have
helped locally produced electronics to win a greater share of the
market as they are able to compete with smuggled ones.

Samsung Electronics Indonesia, for example, is able to produce
its DVD players at only around Rp 700,000 from its several
plants, including one in Cikarang, Banten.

It is a similar story at LG Electronics Indonesia. With its
plant in Cibitung, West Java, LG can manufacture and sell its DVD
players at around Rp 700,000.

LG Electronics Indonesia marketing and sales manager Sung
Khiun said the luxury tax break had helped his company produce
electronic goods here at lower costs and sell them at cheaper
prices.

However, Sung said that smuggled LG electronics were available
in the domestic market when similar products were not
manufactured here.

No official data on smuggling was available from the customs
and excise department.

Sung's comments were confirmed by Lee, who is also the
managing director of Samsung Electronics Indonesia, saying that
was the reason Gabel proposed that the government scrap luxury
tax.

"The proposed scrapping is only for limited consumer
electronics with certain types and specifications, though," said
Lee.

Gabel proposed a zero luxury tax on 29-inch to 42-inch
televisions, washing machines with a capacity of up to 10
kilograms, refrigerators with a capacity of between 180 liters
and 230 liters, and air conditioners with a capacity of over 1
PK.

"The zero luxury tax is needed to help reduce smuggling as it
will narrow the disparity in prices between legal and smuggled
electronics, and at the same time will make the local market grow
faster to attract new investors," said Lee.

Data from Gabel show that sales of electronic products were
estimated at Rp 30 trillion last year, compared to the market
potential in the country of around Rp 50 trillion, with a 20
percent growth annually.

"With zero luxury tax on consumer products, we can compete
with smuggled products and win the competition," said Lee.