Government to protect trade against slump

Government to protect trade against slump

Berni K Moestafa, The Jakarta Post, Jakarta

Local trade organizations urged the government to raise import
tariffs in anticipation of a global recession, just as Indonesia
is preparing to open trade in line with next year's
ASEAN Free Trade Area (AFTA).

The National Economic Recovery Committee (KPEN) warned on
Thursday of cheap imported products flooding the market here,
once global recession started to pinch Indonesia's neighboring
economies.

The government is too preoccupied with its (2002) budget
draft... . I don't think it realizes the seriousness of the
situation developing outside," KPEN chairman Sofyan Wanandi said
at a media meeting.

Last month's terrorists attacks in the U.S. dealt a severe
blow to world economies already reeling from a slump in the U.S.
market.

While analysts estimate that Japan has slid into recession,
with the U.S. likely to follow, they said Indonesia had yet to
feel the worst of this downturn.

The Indonesian Textile Association (API) predicts a 30 percent
drop in exports for next year from an estimated US$8 billion this
year.

Meanwhile, the Indonesian Electronic and Electrical Home
Appliances Industries (GABEL) predicted a drop of 20 percent to
25 percent haunting next year's export revenues.

Sofyan said foreign investment and loans would drop as well.

International Monetary Fund (IMF) senior representative David
Nellor advised Indonesia to fortify its economy against a drop in
foreign investment.

Finance Minister Boediono concurred, but cited political
stability and security as preconditions. He ruled out applying
new policies to stimulate domestic growth.

Boediono also rejected calls to revise assumptions for the
2002 state budget draft following the unexpected global downturn.

KPEN chairman Sofyan criticized this persistence as flying in
the face of reality.

"Every country out there is scrambling to save its economy,
let's do what we can do to save ours."

"We think this is going to be a short-term crisis ... so we
need short-term measures to cope with it," Sofyan continued.

He said the government had to introduce an emergency package
to mitigate the impact of a global recession.

The government, he said, should ban products suspected of
being dumped, and raise import tariffs on vital commodities.

"You have to clear imports of dumping and illegal products
right away; the emergency situation calls for quick measures," he
said.

But that could prove difficult, with the implementation of
AFTA next year, under which Indonesia must lower import tariffs
for certain products to a maximum of five percent.

According to the Indonesian Chamber of Commerce and Industry
(Kadin), local companies are not ready for AFTA next year.

Kadin chairman Aburizal Bakrie said the government should
consider exempting several industries deemed too weak to compete.

"There should be a temporary, exclusive list for companies to
cope with AFTA," he said.

Separately, economist Bustanul Arifin of the Institute for
Development of Economics & Finance (Indef) said trade protection
caused distortion in an economy.

"Basically, it (protection) favors a few at the expense of the
many," he said.

Raising import tariffs would not only burden consumers, it
would also add to inflationary pressures, he warned.

Instead of trade protection, he said, the government should
help exporters penetrate new markets to offset the decline in
traditional ones, like the U.S. and Japan.