The Government said that Free Trade Agreement (FTA) negotiations should be with an investment commitment so that the flow of liberalization does not harm the national interest. Until now, number of FTAs followed by Indonesia has not been fully implemented. By doing so, Indonesia has experienced a considerable deficit. Currently, Indonesia is in the process of negotiating an FTA with the European Union and South Korea. In every negotiation, investment commitment is considered to be the main thing. Because, if we are only relying on trade-to-trade, Indonesia will be unable to compete in trade.
This condition will happen because Indonesia does not have an export mainstay that could match other countries such as South Korea. Therefore, in order to save the national interest, he committed that he will put the volume of investment in the agreement clauses. He hopped that Indonesia negotiators in the negotiation of Indonesia – South Korea FTA plans should consider this matter. This is to prevent additional injured industries due to the invasion of imported product in the FTA mechanism. “I worry that the free trade agreement will harm Indonesia if it is not supported by the flow of investment funds”, said Minister of Industry, MS Hidayat, Friday (August 16).
Meanwhile, in order that the foreign investment (PMA) and domestic investment (PMDN) continue to increase, Hidayat committed to encourage the provision of incentives such as tax exemption for a certain period (tax holiday) and reduction of taxes (tax allowance). This year, the Ministry of Industry proposes five companies to the Ministry of Finance as potential recipients of tax holiday.
The Industry Minister expects that companies who wish to invest in the country and wish t get incentives, to accelerate the fulfillment of administrative and technical requirements. According to him, the low realization of tax holiday last year and in the first half of 2013 is not only because the government is moving slowly, but also investors. Meanwhile, growth on non oil & gas industry has decreased since 2006 to 2009 with an average of only 4.26% or be low the national economic growth which is at 5.6%. However, since 2010, industry in this sector showed sign Of recovery with 5.12% growth, or still below the national economic growth at 6.22%.
Intensification of program of downstreamization of natural resource-based industries by the Ministry of Industry until August 2013 is claimed to be able to attract new investments up to USD 28.8 billion. The fantastic value comes from a number of companies which are based on non-renewable natural resources (minerals, metals, and oil & gas) and renewable natural resources (crude palm oil/CPO, cocoa and rubber). Some the investment has started to be realized, and some are still a commitment.
In addition to natural resource-based industries, the Ministry of Industry will also focus on encouraging production of local components, particularly mobile phone products, to be able to operate by the end of next year through some incentive schemes and tightening of importation. He said that currently there have been no local manufacturers who get official registration mark for the production of mobile phone product. However, most have expressed their readiness and are making production plans.
The minister said that mobile phone parts industry is one of the priorities of the government. He worried that if this industry is not encouraged, Indonesia will become a market for foreign vendors. Currently, he is bringing together local mobile phone manufacturers with other components industries from 13 industry sectors. Some incentive schemes that have been prepared by the government to encourage domestic industry include import duty exemption for raw materials through Government-Paid Import Duties (BMDTP).
Business News - August 21, 2013