Putting business at ease<\/p>\n
The new package of deregulation measures announced the other
\nday complements a previous package delivered earlier this month.
\nWhile the previous one put emphasis -- and substantially so -- on
\nthe ways and means to encourage more foreign investments, this
\nnew package focuses more on the import sector, to strengthen
\nexisting industries to better compete on the domestic as well as
\ninternational markets. The new measures cut down import duties,
\nremove non-tariff barriers and lift surcharges. All of this
\nhopefully will reduce the input costs in the respective
\nindustries.<\/p>\n
At least two different results can be expected. First, output
\nprices will decrease proportionally, which will make products
\nmore affordable to more people, consequently increasing demand.
\nSecondly, with the same amount of input, more output can be
\nexpected, which in turn can reduce the unit cost of production,
\nwhich will decrease prices further, and in turn increase demand.<\/p>\n
At least theoretically, that is the expectation. Lower prices
\nincrease demand; higher demand increases production volume, which
\nwill further reduce the cost per unit of goods produced.<\/p>\n
Domestically, the national economy can be expected to grow
\nfaster; externally, Indonesian products will be more competitive
\nin the world market.<\/p>\n
All of this explains the reasoning behind the new package as
\npronounced by Coordinating Minister Saleh Afiff: "... to step up
\nthe whole spectrum of development activities directed to enhance
\nthe national economic situation and resilience." At the same time
\nthe measures conform with the Uruguay Round commitment and even
\n"anticipate the post-Uruguay Round development in world trade."<\/p>\n
Businessmen can argue about a lot of things concerning this
\nnew package. It can be perceived as not substantial enough
\ncompared to the previous one. Many expected a more significant
\nreduction in the protection of domestic industries in the form of
\ntariff and\/or non-tariff barriers. Some sectors of the economy
\ncontinue to be unnecessarily protected, like some agricultural
\nproducts, paper products and the automotive industry.<\/p>\n
On the other hand it can be pointed out that last year the
\ngovernment indicated that there would be no more "big"
\nderegulation packages. Streamlining the economy through
\nderegulation measures would continue, but in "smaller" steps. It
\nwas a kind of acknowledgment of the existing protection provided
\nfor the domestic industries, while at the same time hinting at
\nthe gradual approach to be taken by the government.<\/p>\n
As we noted in this column a few weeks ago, the announcement
\nof the deregulation is simply the start of a long and arduous
\nprocess that will require good coordination among the various
\ngovernment agencies, in the nation's capital, as well as in the
\nprovinces. The effectiveness of deregulation depends a lot on the
\ntechnical guidelines that have to be formulated.<\/p>\n
However, it seems only proper for us to remember that economic
\nreasoning alone is not enough to encourage economic activity.
\nWhen a businessman makes an economically strategic decision,
\nwhether it is to expand his business, or to invest in some new
\nventure, the economic calculation is just one of several
\nconsiderations he has to take into account. Political risk is one
\nof those and this kind of risk is hard to measure.<\/p>\n
Therefore, businessmen need to be assured politically as well
\nbefore they can be expected to respond to available
\nopportunities. Political assurances are usually read through
\nsignals given by the government. Thus the question now is whether
\nthis new deregulation package is being provided along with the
\nnecessary political signals to encourage businessmen to take
\naction. Somehow it seems to us that this aspect has not been
\ngiven the full attention it deserves.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/putting-business-at-ease-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}