Indonesia to raise tax on imported raw materials to help manufacturers

JAKARTA (REUTERS) - Indonesia's government plans to lift taxes on some imported raw materials used by manufacturers, officials said on Tuesday, in a bid to attract investment and jump-start the worst economic slowdown since 2009.

The change is the latest in a package of new government measures following last week's data showing economic growth at a slower-than-expected pace of 4.71 per cent in the first quarter.

President Joko Widodo's administration has also promised to take steps to speed up government spending, while the central bank prepares a mix of monetary policy changes.

On Tuesday, the government said it aimed to lift taxes on all imported materials used in the manufacture of products containing at least 40 percent of local content.

Officials declined to elaborate on the regulation.

Manufacturers currently pay taxes on raw materials from countries that have not signed free-trade agreements with Southeast Asia's largest economy.

"This is an innovative forward-looking idea, thinking of ways to spur manufacturing industry's activity domestically,"Bachrul Chairi, director general of international trade cooperation at the trade ministry, told reporters.

"The added-value will be here, the workforce will be here and we will get a multiplier effect."

The government hopes to issue the new regulations later this year, but it was not clear when they would take effect.

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