Thu, 11 Dec 2008
Foreign governments and business people are becoming alarmed that Indonesia’s policies to mitigate the impact of the global financial crisis are creating trade barriers that violate World Trade Organisation obligations, despite its promises to abstain from protectionism.

Diplomats and executives do not believe there is a “grand plan” but rather that an absence of co-ordinated policy-making is giving nationalist officials free rein to pander to anti-foreigner domestic interests.

Some provincial officials are also voicing opposition to central government policies, while wealthier Indonesians say conditions are akin to the 1980s, when it was cheaper to fly to Singapore to shop than to buy goods in Indonesia such as pharmaceuticals, shoes, alcohol, speciality foods and electronics.

President Susilo Bambang Yudhoyono has said at events such as recent summits of the G20 and Asia-Pacific leaders that more restrictive trade barriers would be detrimental to economic growth. But he has remained silent as a litany of regulations recently introduced or being planned, ostensibly to alleviate the crisis, on sectors from pharmaceuticals to textiles, alcohol and food importing, used machinery and film production appear to favour domestic companies unfairly.

The European Union and India are among nations to raise potential WTO violations with the government.

“We unfortunately cannot dispel the fact that there is a protectionist undertone to these measures, since they can be seen as aimed at limiting imports,” an EU official said. “Indonesia must therefore urgently reflect on the actions taken and give a clear signal that a protectionist avenue has not been chosen.”

Causing most concern is a ministry of health regulation which includes the provision that all foreign drug importers must build a manufacturing plant within five years.

Thomas Donohue, the global president of the US Chamber of Commerce, is among those who have written to Mr Yudhoyono asking that it be reviewed.

A senior official in the ministry co-ordinating economics said the regulation was introduced without its knowledge and that it was likely to be revised.

Another regulation, coming into effect next week, states that imports on 500 individual tariff lines across textiles, footwear, toys, electronics and food and beverages will require special licences.

Mari Pangestu, the trade minister, told the Financial Times: “We will comply with our international commitments and if we do have to take temporary steps to safeguard our domestic market we will do so in line with the commitments we have. If there are discrepancies we will obviously look into it.”

Peter Fanning, head of the Jakarta-based International Chamber of Commerce, said: “There’s no sign of overriding protectionist policy but that’s because there’s no co-ordinated trade policy. So agencies do their own thing and then people are left to interpret policy as best they can. In certain quarters there’s definitely an anti-foreign investor attitude.”



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