CHENNAI: The Indonesian government is betting on a tax incentive for export of value-added products from the country and attract more investments from India. The country expects that the tax incentive, compared to the higher tax structure for trading of raw coal and crude palm oil from Indonesia to India, would lead the Indian importers of these products to think of setting up refineries and factories in Indonesia, said Indonesian ambassador to India, Andi M Ghalib.
“India is importing a lot of natural resources from Indonesia. If they refine these products there itself, it would support the local people,” he said. India currently imports coal, minings, crude palm oil, wood and rubber, among others, from Indonesia.
Under a new tax structure, the Indonesian government has increased the tax for export of raw natural resources from the country to 18-20 per cent. However, it has a provision through which the taxation for value-added products would be almost half, at 9 per cent, compared to the original tax.
“Indian companies can avail the tax benefit if they could do some value addition by refining the coal, mining products and palm oil in Indonesia itself and import them to India. This will be mutually beneficial for Indonesia and India,” said Leonard F Hutabarat, councellor with the Embassy of the Republic of Indonesia in India.
On one side, it would help Indonesia’s local economy by providing employment to local people. On the other, it will help Indian companies to import coal and palm oil at a lower cost. He added that more Indian companies were looking at options to set up facilities in Indonesia through joint ventures with local companies after the new tax structure was announced.
“At present, investment from India to Indonesia is around $70 million and we expect it to grow 100 per cent every year,” he added. In terms of overseas investments into Indonesia, India ranks 15th at present, while Chinais the largest.
The bilateral trade between the two countries has touched $20 billion recently and the target for 2015 was revised from $25 billion to $45 billion owing to the growth rate, said Ghalib.
Of the $20-billion bilateral trade, around $11 billion is from Indonesia to India. Around 70 per cent of the imports from Indonesia to India is coal and mining products and the second largest imports is crude palm oil.
He said that the country invited Indian investments in the areas of agriculture, rubber, mining, coal, textiles, defence and information technology.Indonesia’s national airline Garuda would start direct flight between Jakarta and some of the Indian cities by the middle of this year.
A business delegation comprising around 50 businessmen from various parts of the country would visit Indonesia to explore business opportunities there. The Indonesian representatives will also meet the Tamil Nadu government officials on April 25 to discuss issues related to increasing trade and investment activities between Indonesia and Tamil Nadu, Indonesian envoy said.
