JAKARTA Oct 29 Indonesia will offer Taiwan's
Hon Hai Precision Industry Co a tax package aiming at
kickstarting the consumer electronics maker's stalled plan to
invest billions of dollars in Southeast Asia's largest economy,
a government official said.
Budi Darmadi, a director general at the industry ministry,
told Reuters in an interview the incentives have yet to be
finalised, and will fall short of an import tariff waiver that
Hon Hai has sought in months of talks with the government.
The wrangling has made Hon Hai, which makes around 60
percent of its revenue assembling iPhones and iPads and in other
work for Apple Inc, the latest in a series of global
companies to raise alarm over the tax environment in Indonesia.
Economy watchers say the country's tax system has hindered
much-needed foreign direct investment.
"For sure the Indonesian government will provide incentives
for investment for certain amounts and in certain fields,
according to Indonesian government regulations," Darmadi said in
the interview on Friday.
But the government does not intend to remove current import
duties of up to 7.5 percent for cell phones and their
components, the official said.
Hon Hai, the flagship listed unit of Foxconn Technology
Group, was still in talks with the government and declined to
provide further comment, a company spokesman said on Monday.
As the world's largest contract electronics manufacturer,
Hon Hai has been trying to diversify its business and client
base as momentum slows at Apple. It hasn't disclosed the
potential investment amount, but Indonesia's trade minister last
year suggested a figure of between $5 billion and $10 billion.
Company officials indicated earlier this month that it would
be difficult for Hon Hai to expand into Indonesia if it was
forced to pay import taxes on all of the electronic components
currently unavailable in the Southeast Asian country.
"If we try to make phones here, there are 100 components we
will need to pay tax on. How would you be able to make a
reasonable, profitable business?" Simon Hsing, a company
spokesman, told reporters on the sidelines of an economic summit
Hon Hai has a tentative agreement in place with Indonesia's
largest mobile phone distributor, PT Erajaya Swasembada
, to build a manufacturing plant to assemble handsets,
Erajaya's CEO Budiarto Halim told Reuters earlier this month.
He declined to provide specifics of the deal, but said
Erajaya would hold a minority stake in the joint venture.