03/10/2012 (Jakarta Globe) - Singapore-listed conglomerate Wilmar Group plans to invest more than $250 million in the construction of a petrochemical refinery in Gresik, East Java.

Industry Ministry official Harris Munandar said late last week that Arya Persada Indonesia, a subsidiary of Wilmar, filed an application to access a government-incentive tax holiday for the planned investment.

He said the new plant was intended to manufacture refined petrochemical products for export.

Harris said the company was not initially eligible for the tax break and had to rearrange its plans in order to qualify.

“Initially, Wilmar was not eligible for the tax holiday because the investment value was only $26 million. But because Wilmar wanted to get the incentive, the company then increased the investment to $250.5 million,” he said.

Under the tax holiday arrangement, introduced in August last year, any company intending to invest at least Rp 1 trillion ($104 million) that deals in base metals, machinery or telecommunications equipment, or in pioneering industries such as oil refining, petrochemicals and renewable energy, would be eligible.

The tax holiday — an exemption from income tax for a certain period of time — is available to local and foreign firms.

The rules give the Finance Ministry the right to offer the exemption to companies it believes are of strategic value to the country’s economy.

Harris said that Wilmar will begin the construction on the new plant as soon as the government grants the tax holiday.

“The plan is to start production at the factory by 2016,” he said.

Contacted by Investor Daily on Sunday, Wilmar Group commissioner Master Parulian Tumanggor confirmed the investment plan. “It is true. We have filed an application for a tax holiday for $250 million worth of investments,” he said.

He declined to reveal other details about the company’s future plans.

In April, the company announced a $300 million plan to construct a flour mill and bio-refinery plant in Gresik. The company said the plant would process crude palm oil into derivatives products. It said it would supply only 30 percent of the crude palm oil needed at the facility, with the remainder bought from other plantation companies.

Wilmar, the world’s largest publicly-traded palm oil company, has several plans on Sumatra and Java.

The company has about 185,000 hectares of plantations in Indonesia, accounting for 75 percent of the company’s total.

Wilmar’s net income dropped 53 percent to $378 million in the first half of this year, while revenue climbed 7 percent to $21.5 billion. It has invested Rp 33 trillion in Indonesia since 1991.

The next step in securing the tax holiday, Harris said, is the processing of the application at the Finance Ministry. The Industry Ministry also has input into deciding on the merits of the application.

Harris said the country’s largest petrochemical company, Chandra Asri Petrochemical, will soon be granted a tax holiday for its $150 million investment for the construction of a butadiene factory.

“The application is now at the state secretary’s office and is waiting for the president’s signature,” he said.