Daily struggle: People buy chili peppers at a traditional market in Surabaya. Surging imports had weakened industries in Indonesia. — AFP
JAKARTA: Several businesses have welcomed a government plan to revise the country’s import policies less than a year after the latest amendment was introduced in May last year, a move deemed necessary amid struggling local industries, factory closures and sweeping layoffs.
The revision would target a Trade Ministerial Regulation, which removed the need for technical approvals when importing goods in certain sectors.
Some industries have said the regulation was a key factor in the decline of the country’s manufacturing output.
It is not clear what changes the government would introduce, but some businesses are in favour of reviving the import restrictions introduced in past regulations.
Redma Gita Wirawasta, chairman of the Indonesian Filament Yarn Producers Association, said that he had attended a discussion on the issue with the ministry in early January and that concerns in the textile, apparel and footwear industries had dominated the talk.
“We also talked about the overall condition of the sector. About 60 factories have shut down and hundreds of thousand people are losing jobs, it’s a dire situation,” Redma told The Jakarta Post.
During the meeting, textile producers demanded tighter import controls for all products under the harmonised system’s two digit codes of 50-63.
Surging imports had weakened not only the textiles industry, but also the upstream industries like petrochemicals, including key textile raw materials like purified terephthalic acid.
The electronics sector had also voiced strong opposition to the prevailing import policy. Daniel Suhardiman, secretary general for the Association of Electronic Entrepreneurs, said last Friday that the removal of technical approvals in the latest revision was detrimental to businesses.
“Just revert to the old rules,” Daniel said, referring to when restrictions were still in place.
Previously, the government made three revisions on import regulations from April to May last year.
The revisions were the government’s response to widespread criticism from businesses over the raw material import prohibition and limitations, stipulated under a Trade Ministerial Regulation that took effect in March last year to protect local industries from imports, especially illegal ones.
Some businesses welcomed the latest revision as it eased imports of raw material, auxiliary goods and capital goods, but some others slammed the revision, claiming the policy prompted the influx of cheap imports and undermined local manufacturing.
Trade Minister Budi Santoso said on Jan 6 that the government was currently reviewing the import policy but remained tight-lipped about any impending changes.
“We’re always evaluating all policies,” Budi told reporters.
“The review process is ongoing. Trade policies need to stay dynamic and regularly reviewed.”
Industry Minister Agus Gumiwang said on Jan 6 that he welcomed the latest import policy review, pledging to provide input in order to protect local manufacturers.
Similarly, deputy Manpower Minister Immanuel “Noel” Gerungan, in December last year, joined the call for the revision after receiving complaints from businesses and labour unions about layoffs and company shutdowns over the past year, blaming the import policy as a direct cause.
Budihardjo Iduansjah, chairman of the Indonesia Retail and Tenant Association (Hippindo), told The Jakarta Post last Friday that he welcomed the decision, but hoped the government would still support the entry of legally imported goods.
The association is set to meet with the Trade Ministry yesterday to present retail industry suggestions, including simplifying and speeding up the import process for legal goods which pay taxes.
Experts have said that revising the import policy alone would not fix the problems plaguing the textile industry, which had been hit by a combination of factors.
Centre of Reform on Economics Indonesia executive director Mohammad Faisal pointed to inconsistent trade policies, particularly in controlling both legal and illegal imports of finished textile goods, as major contributors to the sector’s decline.
“There is much more to fix,” Faisal told The Jakarta Post last Friday, including harmonising trade policies for struggling industries and addressing rising production costs.
Indonesia Strategic and Economic Action Institution senior fellow Ronny P. Sasmita said that the government must remember that protectionist measures “should support, not replace,” efforts to develop domestic industries, rather than something enforced as a shortcut to gain competitiveness.
“We need a full overhaul of the manufacturing sector for reindustrialisation, not just a fix to the import policy. Indonesia must also prepare products that can actually compete with goods from abroad,” Ronny said.
Centre for Indonesian Policy Studies researcher Hasran said that reinstating technical approvals could potentially harm productivity rather than enhance it, as industries rely on affordable, high-quality raw materials often only available through imports.
“Stronger domestic competitiveness would protect exports, regardless of safeguards,” said Hasran.
Coordinating Economic Minister Airlangga Hartarto said on Sept 30 last year that lagging productivity bears most of the blame for the limited competitiveness of Indonesian manufacturing in the local market, not cheap foreign goods.
This includes failure to optimise performance through research and development, as well as upgraded machinery. — Jakarta Post/ANN
