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.