Curbing import growth<\/p>\n
The 1995\/1996 current account deficit of nearly US$8 billion,
\ntwice as large as the original estimate made early last year, is
\nregarded by most analysts and the government as the biggest
\nobstacle to sustaining high economic growth. Because a steep rise
\nin imports accounted for 32.4 percent of the deficit, from
\nJanuary to September 1995, the government considers it most
\nimperative to cut import growth down to 11 percent this year.<\/p>\n
Most analysts, however, doubt the government will be able to
\nreduce import growth so sharply and still reach the 7.1 percent
\neconomic growth target for the coming fiscal year.<\/p>\n
Furthermore, we think the almost 100-percent increase in the
\nimports of consumer goods last year is causing an inordinate
\namount of concern.<\/p>\n
First of all, consumer items still account for less than 10
\npercent of our total imports. There was also an aberration in the
\ncomposition of imported consumer goods last year in that we
\nimported about US$550 million worth of rice and sugar (January-
\nSeptember, 1995). Food imports in that period shot up 313 percent
\nfrom the same period in 1994, when rice and sugar imports were
\nonly $44.1 million. For this year we believe rice imports will
\nfall sharply based on a 4-percent increase in rice production
\nlast year, compared to a decline of 3.6 percent in 1994.<\/p>\n
Of all the current account components (trade in goods and
\nservices -- including profit repatriation -- foreign debt
\ninterest payments, shipping, insurance and tourism), the
\ngovernment's influence is greatest over the trade in goods
\n(imports and exports).<\/p>\n
Thus the government has taken a series of measures to tighten
\nthe monetary policy to reduce the amount of credit available for
\nimport financing. But we need to keep in mind that import growth
\nis directly related to economic expansion in a developing country
\nlike Indonesia, where almost 90 percent of total imports consist
\nof capital goods as well as intermediate and raw materials.<\/p>\n
Theoretically, imports will have to increase at an even higher
\nrate this year in view of foreign investment commitments of
\nnearly $40 billion, almost double the amount licensed last year.
\nThe higher export growth target (19 percent) set for this year
\nalso will result in more imports, on which the manufacturing
\nindustry still depends for raw materials, intermediate goods,
\ncomponents and parts.<\/p>\n
Lowering import growth without adversely affecting economic
\nexpansion will only be possible if those imported goods can be
\nreplaced by local products. But we cannot cut down sharply on the
\nimportation of capital goods. For even though we have been
\ncapable of manufacturing airplanes, our machinery and machine
\ntool industries are still in the early stages of development; the
\nmost developed machinery industry we have is in the textile
\nindustry. However, for various raw materials and intermediate
\ngoods our production capability and capacity are fairly
\ndeveloped, especially for those based on local resources.<\/p>\n
The problem lies with industrial users, many of whom prefer
\nimported materials to local products because of favorable tax
\ntreatment and softer payment terms. Export-oriented companies are
\nentitled to get back the duties and value added tax they pay on
\nimported materials, but the rebate facility is not granted to the
\nprocurement of local materials, even if they are used for export
\nproducts. In addition, international market competition enables
\nimporters to get soft payment terms from their suppliers
\noverseas.<\/p>\n
Therefore, if the government is serious about promoting the
\nuse of local products to slow import growth, the discriminative
\ntax treatment should be removed. The government must also devise
\nways of enabling local suppliers of raw materials and
\nintermediate goods to sell their goods on credit terms. Without
\nspecial programs, local suppliers will never get loans as cheap
\nas their competitors overseas. In the end, even though the prices
\nof local products are slightly higher than imports, industrial
\nusers will find it cheaper and more convenient to procure locally
\nbecause of speedier deliveries (reducing inventory costs) and
\nless hassle at seaports.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/curbing-import-growth-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}