Govt hopes tax breaks will boost research

Wednesday, July 25, 2007
The Jakarta Post, Jakarta

The government will appoint an independent committee to formulate guidelines for the implementation of a new regulation offering tax and customs incentives, as well as technical assistance, to businesses that invest in research and development (R&D).

The move is necessary so as to boost R&D spending, by the private sector particularly, State Minister for Research and Technology Kusmayanto Kadiman said Tuesday.

Indonesia's annual spending on research averages some US$300 million, most of which comes from the government. This is way behind China's $76 billion, or even Malaysia's $1.2 billion and Singapore's $2 billion.

Kusmayanto said the establishment of the committee -- comprising representatives of universities, business organizations and government institutions -- was the first step toward improving Indonesia's R&D performance.

With the formulation of the guidelines, the recent government regulation on the allocation of corporate revenues for the strengthening of technology, engineering and innovation would soon be able to implemented.

"We are encouraging the participation of the business sector in this research and development effort. Our long-term goal is to see 3 percent of GDP being spend on research," Kusmayanto said.

Citing as an example Norway, which allocates more than 4 percent of its GDP on research and development, which is one of the highest levels in the world, Kusmayanto said that it would be good progress if research spending could reach 1 percent of GDP within 10 years.

The current allocation on research and development is 0.04 percent of GDP, while neighboring countries Malaysia and Singapore allocate almost 2 percent of their GDP on R&D, said Kusmayanto.

In his opening speech, Kusmayanto explained that the issuing of the regulation was part of a national strategy to strengthen links between universities, research and development institutions, businesses and networks in the science and technology fields.

"The results of research and development, as well as the application of science and technology, which mostly take place in the universities and research institutions, need to be made known to the public.

"This would lead to the making of products that would support national development, strengthen competition and give rise to national pride," said Kusmayanto.

The regulation, which was issued June 22, stipulates that businesses -- be they private companies, state-owned companies, or cooperatives -- that allocate a portion of their profits to research will be able to avail of incentives.

The incentives can take the form of tax incentives, customs incentives, or technical assistance.

M. Said Didu, secretary to the State Ministry for State Enterprises, said the government regulation offered a good opportunity for increasing state-sector spending on R&D.

"With the total capital and operational spending of state enterprises amounting to between Rp 700 trillion and Rp 800 trillion per year, the country's spending on research would increase sharply if their total spending on R&D amounted to 1 percent," Didu told the meeting. (02)