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 Indonesia encouraging agriculture investment

20/3/06 (Bloomberg News) -- JAKARTA Indonesia could give tax breaks to help attract overseas investment in its oil palm plantations, cocoa and other agricultural products, a government official has said.
"Indonesia is sitting on the world's biggest agribusiness that has not been touched," said the Investment Coordination Board chairman, Muhammad Lutfi.
"We want to put some value creation and export at least half-finished goods," Lutfi said, "so then it would be of greater value, add jobs and hopefully prosperity."
Indonesia is trying to attract $426 billion of investment by 2009 amid competition from China and India.
To succeed, the government needs to cut red tape, said Benny Tjoeng, vice president at Astra Agro Lestari, the country's largest publicly traded plantation company.
"Indonesia's series of bureaucratic investment licensing and permits must be simplified," Tjoeng said. "For investors, it takes months to obtain more than a dozen necessary permits and licenses from local administration and ministries."
It takes an average of 151 days for investors to go through each of the 12 procedures to start a business in Indonesia, according to the World Bank. That compares with 30 days in Malaysia and six days in Singapore. The government is "trying to cut it down to 30 days," said the finance minister, Sri Mulyani Indrawati.
Indonesia is one of the world's largest cocoa and hardwood log producers, but it is not attracting a lot of overseas investment in the food crop, plantation and forestry sector.
The government could provide "incentives" to develop areas mainly in the eastern part of Indonesia, which remain underdeveloped, Lutfi said. About 80 percent of the 909 investment proposals last year were for Java.
"The priority is still to get the correct location. If the land is right, the next is more procedural issues such as clear land title rights," said Yeo How, chief financial officer of the Malaysian company IOI. "Fiscal incentive is always welcome, but I would say that for the plantation industry that will not be the key motivation."

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