Economist: Consumption of Local Products Can Boost Labour Absorption

Increasing the consumption of local products is considered capable of having a rapid impact on labour absorption, especially in the micro, small, and medium enterprise (MSME) sector, which is largely labour-intensive. Economic observer and lecturer at the Faculty of Economics and Business, University of Indonesia (FEB UI), Dr. Toto Pranoto S.E., M.M, said that MSME sectors such as food and beverage (F&B) and fashion have the potential to be the first to feel the benefits of increased demand for domestic products. ‘The business sectors that MSMEs are engaged in, such as F&B or fashion, are relatively labour-intensive sectors, especially when supported by a supporting ecosystem, so that labour absorption can be optimal,’ said Toto Pranoto. According to him, increasing the consumption of local products not only impacts the growth of small and medium-scale businesses but also has the potential to drive other economic sectors linked to the production supply chain. He explained that increased MSME activity could be a driver for the growth of the manufacturing sector in the medium term. However, the revival of the manufacturing sector requires more time because industry players must consider various factors before increasing production capacity. ‘Meanwhile, the manufacturing sector might revive in the medium term because the decision to increase production volume will heavily depend on the availability of raw materials and production arrangements,’ he said. Toto said the increase in MSME sector activity is expected to trigger the growth of the manufacturing industry along with the rising need for supplies of goods and supporting materials. He added that sectors whose consumption could potentially be encouraged include the food and beverage group, traditional and herbal medicines, and daily necessities or fast-moving consumer goods (FMCG) because they have relatively high demand in the market. According to him, strengthening the consumption of local products needs to be supported by various strategic measures, ranging from protecting domestic industries to enhancing the competitiveness of local producers. The government, he continued, needs to strengthen import controls and prevent the entry of smuggled goods, while business players need to increase production efficiency, strengthen the supply of raw materials, and build stronger brands to be able to compete in the domestic market.