Government urged to stop tax-free car imports to Batam

Fadli, The Jakarta Post, Batam | Thu, 05/24/2012 

The Batam municipal administration has urged the central government to stop imports of tax- and duty-free cars into Batam, arguing the policy has a negative impact on the region.

Speaking to The Jakarta Post on Wednesday, the Municipal Industry and Trade Agency head Ahmad Hijazi said that the policy had created problems which the Batam administration had to deal with.

“The trade in imported cars, as the municipal administration sees it, is not fair and tends to deceive customers, not to mention the concerns about traffic jams in Batam,” Ahmad said.
He added that being exempt from taxes and import duties, the prices of imported cars in Batam should be 75 percent lower than the prices of cars sold by brand-holder sole agents (ATPM).

In practice, however, both types have relatively similar prices.

This, Ahmad said, had raised questions as to where all the expected tax-free and duty-free benefits had gone.

“The state has lost the potential taxes. The municipal administration has to deal with the traffic jams. The industry as well has not enjoyed any benefits ,” he said.

To help deal with the problem, according to Ahmad, the municipal administration had been considering reenacting its bylaw on transportation which controls the flow of cars into Batam in a bid to maintain the balance between the available roads and traffic growth.

The central government has since August 2010 allowed the import of cars into Batam with tax- and duty-free facilities, the control of which was given to the Batam Island Management Agency.

The majority of cars imported into Batam are luxury models such as Hummers, Rubicon Wranglers and Toyota Alphards.

Head of the agency’s publication division, Ilham Eka Hartawan, said that the agency had issued licenses to seven car importers for this purpose. Since then, some 1,200 cars have been imported into Batam.

According to Ilham, the causes of the high prices could possibly be due to various factors, including distribution and promotion costs.

With regard to the high cost of bureaucracy, he said, there had been no complaints from the importers.

“We are still evaluating whether to continue or stop the imports,” said Ilham, adding that his side could not control the prices of imported cars in the market because it was beyond its authority.

But Ilham said that the Batam agency also supported the Batam Municipal Administration’s proposal for an end to the imports if that was in Batam’s best interests.

Separately, the operational manager of PT Ganda Auto, one of Batam’s biggest car importers, Teddy Julius, declined to explain why the prices of cars imported within the free trade zone (FTZ) facilities were almost the same as those sold by the ATPM.

But he admitted that the reason his company decided to invest in Batam was indeed because of its FTZ facilities.

“Let the government make the decision on the car-import system in Batam. We will just follow,” Teddy said.

Meanwhile, Julie, a sale representative of PT Ganda Auto, said that fully built cars sold in Batam were 30 percent cheaper than the same products in Jakarta.