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.