Snags in bonded zones deter investment

Eva C. Komandjaja, The Jakarta Post, Jakarta

Several bonded zone operators complained on Monday about the difficulties they faced in obtaining permits and the various regional levies and taxes imposed by local administrations.

The bonded zone operators that attended a hearing with the House of Representatives Commission V are: PT Jakarta Industrial Estate Pulogadung (JIEP), PT Kawasan Berikat Nusantara (KBN), PT Surabaya Industrial Estate Rungkut (SIER), PT Kawasan Industri Medan (KIM), PT Kawasan Industri Wijaya Kusuma (KIW) and PT Kawasan Industri Makassar (Kima).

Each zone is subject to the individual regulations of its respective regency, established in accordance with Law No. 22/1999 on regional autonomy. The regental administrations thus collect levies and taxes from businesses for permits and licenses, such as building permits (IMBs), investment permits and building use permits (HGB).

The operators suggested that it would be more efficient and streamlined for the central government to provide a one-stop service for processing all requisite permits and licenses. Besides cutting out unnecessary fees and levies, it would save time and eliminate all complications facing investors.

They also complained about the 8 to 10 percent rise in value added tax (VAT) on purchasing or renting lots in industrial estates, which had scared off investors.

PT SIER claimed they had lost 18 investors due to the obscure levies, rising tax and difficulties in obtaining permits.

The value of taxable property (NJOP) in industrial estates was also higher than in other locations, so many companies preferred to set up their factories outside the estates.

However, this may increase the possibility of water or air pollution, particularly for companies without their own waste treatment facilities. In industrial estates, the operators provide waste management services to their tenants, so pollution is checked.

One of the hearing's main concerns dealt with the lack of infrastructure, such as roads and other means of access to the industrial estates. The operators said local administrations should provide such key facilities, instead of the owners or tenants of the industrial estates.

In addition, they said insufficient electricity supplies would negatively affect the businesses. It was predicted that in 2004, the area spanning Java to Bali would suffer an electricity shortage.

The operators said they had to provide their own generators to overcome the lack of electricity, while PT KIM reported that their electricity line was often cut off temporarily, which hampered operations.

Such difficulties would likely lead to a decline in new investor interest, which would in turn slow the economy. Many foreign investors have already withdrawn their investments from Indonesia and moved to other Asian countries, such as Vietnam or China, due to the frustrations and inefficiencies they experienced here.

Bonded zones are specially delineated areas that have been given certain privileges under Indonesia's customs regulations. All goods imported into these zones -- whether international or domestic -- are exempt from excise fees until the goods are exported or re-exported.