Indonesia Scraps Import Tariffs on Upstream Oil, Gas Products

JAKARTA, Nov 20, 2006 (Dow Jones Newswires)

Indonesia's Finance Minister Sri Mulyani Indrawati has scrapped import taxes levied on capital goods used in the upstream oil and gas sector, according to a ministry statement.

The policy change was enacted Oct. 16, and is retroactive to July 16, the ministry said in a press release viewed by Dow Jones Newswires Monday.

"The new policy is aimed at increasing investment in the oil and gas sector," the ministry said in the release, which was posted on its Web site.

The move reflects the government's efforts to improve the investment climate in Indonesia, especially in the oil and gas sector. A lack of new upstream investment was partly responsible for the recent fall in Indonesia's crude oil output, which has declined to its lowest level in more than 30 years.

Exempted from import tariffs include goods related to drilling and production, plant and machinery, transportation, building, tanks, electrical wiring, tubular goods, valves, paints, oils, chemical and laboratory, medical equipment and supplies, and fire and safety.

Import tariffs were imposed on those goods in 2001, as the previous government was desperate to raise funds for the state budget, resulting in protests from the oil and gas industry. The tariffs vary, depending on the product.

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