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)