Rubber council opposes govt export tax plan

Indonesian rubber producers oppose the government’s plan to introduce an export tax on rubber exports, saying that the measure will bring much help in supporting the local rubber processing industry.

Local rubber stakeholders expect the government will provide a wide array of incentives to grow the domestic downstream industry instead of imposing an export tax on the commodity.

Indonesian Rubber Council expert staff Suharto Honggokusumo said on Friday that rather than imposing export taxes, it would be better for the government to provide tax incentives in supporting the local downstream rubber-based industry.

The government could, for example, remove import duties on capital goods and intermediary goods to boost production, as at present the downstream industry, including tires, needed a considerable lot of imported materials that were yet to be produced locally, he said.

“Finished rubber products mostly require intermediary materials, such as black carbon filler, silica and so on, particularly tire, which also needs synthetic rubber as a complement, steel fiber, nylon, bead wire and other materials to make up 40 percent of the item,” he told The Jakarta Post.

Suharto further explained that Indonesian exports of rubber totaled US$2.2 billion in 2010, while imports reached $1.06 billion, comprising mostly of products that the local industry could not supply, such as large-sized tires and automotive parts imported by overseas auto makers from their principals.

Indonesia’s exports of rubber and rubber products stood at $9.37 billion in 2010 and rose by 53.15 percent to $14.35 billion last year.

The ratio between exports and imports suggested that the local downstream industry was already able to meet quality standards of overseas consumers, he said, and therefore, the government had to provide incentives to promote export of finished products.

Suharto pointed out the tax reduction for export promotion of 10 kinds of finished rubber products applied in Malaysia, as an example.

Council chairman Aziz Pane earlier said that the planned export duty on natural rubber would not be effective in stimulating the growth of the downstream industry and would put an additional burden on farmers when prices rose according to international market prices.

The local industry did not have any obstacles in obtaining natural rubber, as it could be sourced from different parts of the country, but instead, it basically needs intermediary material to help production.

The Industry Ministry has said it plans to propose imposing an export tax on rubber in a bid to help the local rubber-based downstream industry.

The government seemed to agree with the plan, despite opposition from rubber producers. Industry Minister MS Hidayat recently said that it would reduce exports of raw materials and increase production of local products with additional added-value.

Deputy Trade Minister Bayu Krishmurti declined to elaborate on the plan and said that the government would see whether the export duty would be effective, as not all commodities would be necessarily charged.

Bayu added that the government would encourage the trade of rubber in the Indonesia Commodity and Derivatives Exchange (ICDX) to enable Indonesia, the world’s second-largest rubber producer, to serve as an international price reference in the future.

“We aim to become a commodity market reference for our main commodities. We will see whether the export duty will be effective, because not all commodities will be charged with it,” he said.