Muhroji, 62, used to buy cable waste from scavengers in Solo and Surabaya to get copper, a key material to make kitchenware. However, the situation has changed as he now exports the craft.

“Metal decorations and ornaments for export require better quality and therefore we import the material from Taiwan,” the owner of CV Setya Budhy, based in Tumang village, Boyolali, Central Java, told The Jakarta Post on Monday.

Learning to produce metal crafts from his father, Muhroji, who is assisted by 20 workers, currently sells his output to the United States and European countries in a container worth Rp 1 billion (US$74,996) each month.

Small and medium enterprise (SME) exporters like Muhroji are set to benefit from the government’s move to scrap import duties, value-added taxes (PPN) and luxury taxes (PPnBM) on raw materials and sample items for production and machinery used to make exported goods, known as KITE, on Monday.

In addition, they can also import their own raw material and machinery directly through bonded logistics zones, cutting the distribution chain that in the past relied on trading agencies.

The measures are expected to significantly reduce the production costs of SMEs and enhance their competitiveness in overseas markets, said President Joko “Jokowi” Widodo during the launch of the facilities in Tumang village, which produces high quality copper products like cooking pots and furniture ornaments.

“Now with KITE, SME costs can be reduced by 20 percent to 25 percent a year and they can also import raw material by themselves,” Jokowi said in the village that he used to visit regularly as a furniture maker.

The new facilities will implement the first economic stimulus package introduced in September 2015, aimed at speeding up the procurement of goods and services. It is estimated that the implementation of the package will affect 57.9 million SMEs nationwide.

Customs and excise director general Heru Pambudi said to be eligible to access KITE, SMEs had to own total assets worth between Rp 50 million to Rp 10 billion with annual revenues of between Rp 300 million to Rp 50 billion.

In addition to this, they have to possess a production facility that has been operational for at least two years. They must also allocate 75 percent of their output for export.

An application for this facility should be approved by the customs office within 14 days.

In its initial phase, the tax exemption has been applied to 22 SMEs from Central Java, Yogyakarta, Bali and West Nusa Tenggara (NTB) that sell metalware, art crafts, cosmetics and wigs to major export destinations such as the United States, European countries and Japan.

Bali-based wig maker Sari Rambut Bangli welcomed the changes as they would ease imports of human hair from India and Europe. The firm’s senior accounting officer Cok Ngurah said the company still had difficulties finding thick and long hair locally for its raw material.

“Indonesians usually color their hair and treat it poorly treat so the hair is broken. The best-quality hair can be found in Europe and India,” said Ngurah.

The firm has so far shipped wigs to the US, Europe, Japan and Korea, sold for around $200 to $300 per piece. It pockets Rp 9 billion in revenue annually from its business.

Apart from obtaining KITE facilities, small and medium enterprise exporters will also be able to access export-based business credit (KURBE) and assistance from the Indonesia Eximbank.

Indonesia Eximbank acting president director Suswijono Moegiarso said it had already disbursed Rp 1 trillion for KURBE last year through a cross subsidy program between big debtors and SMEs. This year, the Indonesia Eximbank will join the government’s 2017 KURBE program, he added.

Bali-based cosmetics and herbal products maker, PT Bali Tangi, said it had received a Rp 2 billion loan with an annual interest rate of 9 percent from the Indonesia Eximbank to expand its business. The interest rate is much lower than the 14 percent offered by banks.

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