Gov’t Gives Incentives For Investment In Mineral And Coal Processing Industry

Jakarta – TAMBANG. To promote the growth of domestic mining products processing industry, the Indonesian government has promised to give incentives to investors. The enticements would include tax incentives, off-take agreement, bailout, and funding assistances.

The above was mentioned by Muhammad Lutfi, Head of Indonesia Investment Coordinating Board (BKPM in its Indonesian abbreviation), after giving a keynote speech for the Seminar & Workshop on “Opportunities and Challenges on Indonesia’s Mineral and Coal Added Value Oriented Industries”. The seminar and workshop were held by the Association of Indonesian Mining Proffesionals (PERHAPI in its Indonesian abbreviation), in Jakarta, 7 October 2009.

Luthfi said that Indonesia has a very good opportunity in developing the mining products processing industries. He explained that Japan, as the major importer of Indonesian metal products, has been working on the effort to reduce environmental pollution level that derives from industrial activities.

”But of course, the environmental pollution levels in Japan and in Indonesia are different,” he claimed. Therefore, when the metal industry activities in Japan has slow down, Indonesia could take over that role.

Nevertheless, the economical value would be insignificant if mining companies decided to build their own small-scale smelter. For iron ore, tin, nickel, or bauxite processing, it would take a long time to reach the break-even point. “Hence, it is necessary for the government to intervene,” he said.

The government must provide some enticements, such as tax incentives. It would reduce the risk for existing investors to move their smelters to Indonesia, and also for new investors who planned to build one in Indonesia. “The incentive would be in the form of tax allowance, or income tax reduction,” Luthfi told.

According to Luthfi, BKPM has been in a final negotiation process with one of the world’s leading iron company. The East Asian investor has committed to build a processing plant in Indonesia, if they were given the same incentive given in Vietnam.

“So, we are discussing the matter. Later on this afternoon, I will bring the subject to the Finance Minister,” he announced. The Finance Minister herself has provided the time, at least to offer new breaktrhough to tackle the problem.

Additionaly, the government would also give an off-take agreement to buy parts or whole product from the company. The agreement could be arranged for state-owned enterprises, such as those who build refinery industry. “The refinery products could be purchased by Pertamina,” he said.

Thirdly, the government also promised a bailout. It would be just like the state utility company’s (PLN) power plants that always require government bailout.

And last, the government would also provide funding assisstances. “We must call Bank Mandiri, BRI, and BNI (state-owned banking enterprises) to form a consortium for lead financing, so Indonesian companies could create added value for the country,” he claimed.

In this context, Lutfi continued, local bussiness players would of course be prioritized. The next in line would be national players, and then international players. “This priority might not be included in the Law, but it is a vision of the people in this nation to upheld sovereignty and to boost the growth of domestic bussiness players,” he concluded.