Industry Receives Tax Holiday

Wandrik Panca Adiguna
Wandrik Panca Adiguna - 23 Desember 2010  |  04:45 WIB

JAKARTA: The government has prepared fiscal incentives, including tax holiday and tax allowance, to stimulate big-scale investments and industry deepening.

With the incentives, the government believes the manufacturing industry will grow by between 5.2% and 6.1% next year by focusing on six prioritized industries. Minister of Industry M.S. Hidayat revealed the relevant ministries had agreed to provide tax holiday to the heavy (big-scale) industries, pioneer industries, natural resources-based industries, and industries in locations that have few infrastructures. He continued the government would also provide incentives and disincentives to the manufacturing industry to utilize local raw materials optimally down to the downstream industry. "We have reached an agreement with the relevant ministries and are waiting for a decision on a higher forum at the Coordinating Ministry for Economic Affairs. We will announce it in January," he told when exposing the performance of industries in 2010 and the outlook for 2011 yesterday. He explained six prioritized industries that the government would pay attention to in 2011 are the labor-intensive, small and medium, capital goods, natural resources-based, high-growing, and special priority industries. In addition to the fiscal incentive instruments, added Hidayat, there were three other instruments to boost the competitiveness of the six industries, namely the state budget, infrastructure for industrial zones, and administrative support. The government also invites participation from private parties in infrastructure construction through public private partnership scheme. With the incentives and favorable business climate, the Ministry of Industry is optimistic the manufacturing industry can jump by 5.2%-6.1% in 2011, rising from this year's 4.7%, thanks to the national and global economic recovery. To meet the growth target, Hidayat inserted, the manufacturing industry would need an investment of IDR124.6 trillion. "The investments will be fulfilled since some big projects will realize their plants next year." The investments, explained Hidayat, would be able to create 14.91 million jobs and bolster manufacturing product exports to US$92.26 billion next year. Extended Director General of Agriculture-based Industry at the Ministry of Industry Benny Wachjudi added the deliberation over incentives for the natural resources-based industry continued, with a tendency of extending the facilities. Previously, he exposed, the incentives focused on CPO and cocoa, but incentives for the downstream rubber industry was also discussed. "We are still deliberating incentives and may add specific sectors, such as the downstream rubber industry, say the tire industry. This is a positive signal for investors. With the deliberation alone, Hankook has prepared an investment of US$1.2 billion." The Minister of Industry disclosed to develop the labor-intensive industries the government would continue the machinery restructuring program in the textile and footwear industries. Moreover, the government would provide fiscal incentives like tax allowance, give government-paid import duty facility, apply export duty to safeguard domestic raw materials, and apply import trade system. "To promote the growth of the natural resources-based industry, the government will try to provide facilities and incentives like tax allowance, tax holiday, and support for access to loans. Capital goods and machinery investments are being intensified. I am right now looking for the best way to attract capital goods investments." To develop the natural resources-based industries, especially the CPO and cocoa industries, Hidayat said the government would provide tax allowance, tax holiday and infrastructures as well as apply export duties to CPO and cocoa. In the meantime, to bolster the competitiveness of the high-growing industries, such as the auto industry, the government will stimulate the growth of the domestic component industry, facilitate the development of made-in-Indonesia automotive design, and facilitate the development of energy-saving vehicles and appliances. Data by the Ministry of Industry showed domestic and foreign investments in the industry sector during January-September 2010 reached IDR17.03 trillion and US$2.5 billion, respectively, creating 14.4 million jobs in the manufacturing sector in 2010, up 386,640 jobs from 2009.The same data showed some new investments and plant expansions in 2010 were made by, among others, PT Nestle Indonesia (milk processing), PT Panasonic Manufacturing (consumer electronics), PT Gobel Panasonic Battery (battery), PT Sanyo Jaya Komponen (optic component), PT Holcim Indonesia (cement), PT Lafarge (semen), PT Krakatau Steel-Posco (iron and steel), PT Merindo Era Sakti (auto component), PT Uni-Charm Indonesia (baby care and diaper), and PT Arwana Citramulia (ceramic). Director General of Manufacturing Industry at the Ministry of Industry Panggah Susanto said several cement and fertilizer plants targeted to start construction next year. "In the cement industry, we will have Holcim Indonesia and Semen Gresik factories. In te fertilizer industry, we will have NPK fertilizer plants," he said. Optimistic to meet target Separately, Chairperson of the Indonesian Young Businesspersons Association (Hipmi) Erwin Aksa revealed he was optimistic the Ministry of Industry would be able to meet its investment target for 2011. "Based on the good achievement of the manufacturing sector in 2010, I think the investment need for the non-oil and gas manufacturing industry sector is realistic." However, Erwin stated the key to the success of the investment was the ability of the government to maintain investment climate to remain favorable and competitive. He added the government also needed to remove non-technical barriers, such as regulatory and fiscal policy barriers, as incentives for investors. Erwin continued the government also needed to improve connectivity among regions by accelerating infrastructure development and logistics route connectivity. In line with Erwin, Head of the Investment Coordinating Board (BKPM) Gita Wirjawan said the board welcomed the investment target set by the Ministry of Industry. "I believe, with hard work, the target will be realized. We ourselves [BKPM] for 2011 target investment to grow 15% from this year." (smu/hl/wiw)

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