This year, the government will continue to pay the import duties of 16 manufacturing industries as incentives to enable them to compete with foreign products, a senior official said on Wednesday.
Bambang Brodjonegoro, acting chief of the Finance Ministry’s fiscal policy office (BKF), said the fiscal incentives covered manufacturing sectors from pen, carpet, plastic and infusion manufacturers to heavy equipment, power plant transformers and boilers, automotive components, freight cars, telecommunication tools, electronic products and components, and airplane repairs.
The other manufacturers that will receive fiscal incentives from the government comprise those in the fields of sorbitol sweetener for food products, train bogies and components, fiber optic cable, resins, toner, and ship repair and manufacturing.
“We want to ensure the supply of these products for public needs as they are all needed. Secondly, we want to improve competitiveness. There’s also the intention of creating more jobs,” Bambang told a press briefing in Jakarta on Wednesday.
“Generally, the purpose of the policy is to boost manufacturing sectors, especially those that include raw materials and are still dependent on imported components,” he said, adding that the legal basis for the regulation would be in the form of a finance minister regulation (PMK).
The fiscal incentives are also intended to enable manufacturers to compete in export markets.
The import duties imposed on these industries technically still exist, but the government covers the duty payments.
Indonesia’s manufacturing industry growth has been lower than the country’s overall 6.1% economic growth, standing at about 5% in recent years as the products’ competitiveness has been beaten by cheaper items from countries like China.
The government will spend Rp500 billion (US$59,000) on covering the 16 manufacturing sectors’ import duties throughout this year, lower than the initially estimated Rp2 trillion, Bambang said.
“Given [low] realization in previous years, the revised state budget lowered the government-borne
Industrialists often complain about high tariffs imposed by the government as most of their raw materials are imported, which economists consider the root of the problem of higher prices of domestic products compared with imported ones.
The government has pushed efforts in responding to businesses’ concerns by scrapping import duties for several sectors. “The [16 sectors] cover imported raw materials that do not enjoy the duty-free tariff harmonization,” Bambang said.
“The criteria for government-borne import duties are items not produced by domestic industries and those that do not meet industry demand,” he added. ( Esther Samboh, The Jakarta Post)