Experts suggest protectionist measures removal

Experts suggest protectionist measures removal

JAKARTA (JP): The phased removal of the protectionist measures
which have helped large firms grow fat in the past decade would
strengthen Indonesia's down-stream businesses, which in turn will
push the growth of up-stream industry, an economist says.

Speaking at the second day of a three-day seminar on
"Strategies to Resolve Unemployment" yesterday, noted economists
Mari Pangestu and Rizal Ramli said that the government should cut
back on protectionist measures to boost the competitiveness of
large export-oriented, labor-intensive and down-stream
industries.

Open and healthy competition will drive them to use local raw
materials instead of imports, thus boosting the growth of medium
and small scale firms, Mari said.

Rizal concurred that the reason big conglomerates shun local
raw materials is not only the differences in cost and quality,
but also the heavy protection given them by the government.

"Reducing the protections can be seen as a move to promote the
efficiency of the companies and is also in line with the General
Agreement on Tariffs and Trade (GATT)," Mari said.

Rizal said there should be a neutral trade policy in the
future which does not differentiate between large, medium and
small scale companies.

The current regulations, he said, give a lot of protection to
large firms but hardly any to medium and small ones.

Head of the Agency for Financial and Monetary Analysis at the
ministry of finance Dono Iskandar Djojosubroto, said, however,
that the preparation of the new deregulation package which the
government intended to issue about three months ago was not an
easy task.

"Each of the government institutions involved in the
deregulation team has different perspectives and interpretations
as to how far the deregulation should go. Making a set of rules
which makes everyone in the room happy is not easy," he admitted.

Dono assured that despite the differences, all government
institutions share the desire to cut back on protectionist
measures, high economic costs and increase efficiency.

Manpower

Mari believes that within the next five to ten years, manpower
will remain one of Indonesia's greatest assets.

"We must remember that what we want is a good-quality growth,
not growth for the sake of growth itself," Mari said.

Manpower, she pointed out, should therefore be used as
optimally as possible to help lift the country to a higher, more
industrious level.

According to her, the current minimum wage does not need to be
increased.

"Don't concentrate too much on the minimum labor wage because
it can be counterproductive, since Indonesia has in fact a
surplus of labor," she said, adding that higher labor wages could
reduce the country's competitive edge.

She said that other countries such as Vietnam and China could
easily take over the competitive advantage if wages soar too
high.

Mari instead suggested that the government and company
managers put more emphasis on improving the conditions of labor,
such as rules on over-time payment and pregnancy leaves.(10)