Mon, 01 Dec 2008
Crisis Opens Opportunity for Local Products

The government should focus on the domestic market to maintain economic growth during the global financial crisis, respected economist Emil Salim said late on Friday, adding that the recent depreciation of the rupiah should be seen as an opportunity to reclaim the domestic market from imports.

“The rupiah depreciation is inevitable as most of the world’s currencies are also weakening. Thus, imports will lose their competitiveness on the domestic market as their prices soar,” the former head of the State Ministry of the Environment said.

“So, this is a chance for domestic products to win back market share.”

He said the government should also provide fiscal stimuli to promote the growth of domestic industry, besides expanding infrastructure spending and social welfare programs.

The promotion of local industry, together with accelerated infrastructure development, would directly create jobs, maintain domestic purchasing power and decrease dollar demand to pay for imports.

'Why just produce palm oil if we can produce soap, lipstick and various other products from it?'

Emil Salim

Emil said that the sectors that needed to be focused on were those that were dominated by foreign products and sectors where local industry had the potential to expand market share, such as agriculture and resource-based manufacturing industry.

“Why just produce palm oil if we can produce soap, lipstick and various other products from it? Commodity prices are cyclical in nature, so we have to differentiate our products from the others so that we can survive when prices are falling,” he explained.

For financing, Emil said that besides relying on government spending, there were a number of other prospective funding sources, such as local government funds deposited in Bank Indonesia certificates, or SBI, and corporate social responsibility funds.

Finance Minister Sri Mulyani Indrawati has said that the government would endeavor to maintain consumer spending, which is currently the main driver of the economy.

To that end, next year the government is planning to provide Rp 12.5 trillion ($1.05 billion) in tax relief and other fiscal stimuli.

The minister said the government would boost spending by disbursing more than Rp 100 trillion within a month to help finance government projects in the hope that this would have a trickle-down effect.

Edy Putra Irawadi, a deputy at the Coordinating Ministry of the Economy, said last week that the government would provide tax relief to 10 sectors - including the food and beverage, electronics, automotive, chemical and steel sectors - by scrapping duties on imported raw materials and components. Edy did not give details as to the composition of the package by sector.



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