Tunky rules out tax breaks for electronics industry
Tunky rules out tax breaks for electronics industry
JAKARTA (JP): Minister of Industry and Trade Tunky Ariwibowo
has ruled out giving the electronics industry special incentives
based on local content or a product's brand name, as it has done
for the national automotive industry.
Tunky said yesterday such incentives were unnecessary because
the domestic electronics industry was quite advanced.
"Our potential in the electronics industry can be developed
optimally without the help of special means," he said during a
break at a meeting of electronics industry executives.
He said if the government decided to give any special
treatment to the industry, it would have to be covered by
existing regulations.
"Currently I can't say whether we need such facilities. It's
better if we formulate a target and see whether it fits the
existing rules. If not -- but we consider the target viable and
necessary -- we may think about it," he said.
Last year the government granted duty and tax breaks to local
firms which make "national cars".
The cars must bear Indonesian names and have a local content
of 20 percent by the end of a maker's first year of commercial
operation and 60 percent by the end of the third year.
Tunky's comments implied the electronics industry had no
chance of getting any special treatment.
Chairman of the Electronics Association Uripto Widjaja said
the government should create a better investment climate for the
electronics industry.
"Most international electronic corporations are very
selective. Recently we missed the opportunity to attract a huge
prospective investor which moved on to Malaysia and the
Philippines where the government offered tax holidays for the
industry," he said.
The electronics industry is Indonesia's third-largest export
earner after textiles and wood-based commodities, but up to 80
percent of components are imported.
In 1995, component imports stood at $2.3 billion, up from $1.9
billion in 1994.
Indonesia's exports of electronic goods totaled US$2.9 billion
in 1995, representing a 13.4 percent increase over the previous
year's $2.6 billion.
In comparison, Malaysia's electronics exports were worth $15
billion, and Thailand's $18 billion in the same period.
The electronics industry is among 10 leading foreign exchange
earners which have been given special facilities to boost
Indonesia's nonoil and gas exports.
The facilities include various nontax, banking and
administrative incentives.
Director General of Light Industries Firdaus Ali said by the
end of the Sixth Five-Year Development Plan in 1999, export
earnings from the electronics industry was targeted to be US$6.5
billion.
This is about 11 percent of the total industrial export target
of $56 billion.
Firdaus said although the industry's exports were dominated by
consumer electronic goods, business and industrial electronic
goods and electronic components made a significant contribution
to export earnings.
In 1990 business and industrial electronic goods exports were
worth $50 million and electronic components $7.8 million.
In 1995 they rose to $642.6 million and $890.3 million,
respectively.
Firdaus said the government's export revenue target for the
electronics industry was $40 billion by the year 2006.
"For this, we will need investments of $8 billion in the next
10 years," he said.
The government would also encourage more industrial
relocations, particularly by major corporations, he said.
He said consumer electronic goods would contribute $6 billion
to export earnings during this period, information technology $8
billion, wireless telecommunications $4 billion, semiconductors
$8 billion, home appliances $6 billion, and components and
modules $8 billion.
The government also plans to establish an Indonesian
Electronic Development Corporation, electronic supersites, an
electronic super highway and boost investment promotion.
Tunky said research and development was important for the
industry.
"The government will no longer issue protectionist measures.
All competition must now be based on efficiency, which is why
research and development is most important," he said. (pwn)