Govt mulls raising import duties

Govt mulls raising import duties

Evi Mariani, The Jakarta Post, Jakarta

The Ministry of Industry and Trade is considering the raising
of import duties on some farm commodities to curb their import,
in a bid to boost domestic production and to limit depletion of
the country's foreign exchange reserves.

The option forms part of ministry participation in the
government's strategy to withdraw from the International Monetary
Fund (IMF) program, according to Minister of Industry and Trade
Rini Soewandi.

"We might raise import tariffs or modify the trade rules to
restrict imports," Rini said on Friday after a working meeting
with House of Representatives Commission V for industry and
trade.

"We are currently studying all possibilities and have yet to
make a decision on the method," the minister said, adding that a
decision was likely to be reached within two months.

Corn and soybeans are among the commodities likely to see a
rise in import duties, she said, adding the measure was expected
to encourage local farmers to boost production of the
commodities.

Currently, Indonesia imposes zero percent tariffs on soybeans
and corn. This has often drawn criticism from many quarters,
including the Ministry of Agriculture and non-governmental
organizations, given that Indonesia is allowed to impose tariffs
of up to 40 percent on corn and 27 percent on soybeans under
World Trade Organization rules.

Furthermore, they said, all developed countries, including the
European Union (EU), the U.S. and Japan, were still protecting
their agriculture sector.

According to Rini, a decrease in the importation of the
commodities would allow the government to save its forex reserves
and maintain them at a healthy level in order to boost investor
confidence after Indonesia had withdrawn from the IMF program at
the end of this year.

After leaving the program Indonesia will not be eligible to
debt rescheduling facilities from the Paris Club of creditors.

Rini added her department was also giving consideration to
raising export tariffs on raw commodities like coffee beans to
curb their export and to promote development of a domestic
processing industry.

This would create more employment in the country, Rini said.

As part of post-IMF economic reform programs the government
would also boost exports to nontraditional markets like Eastern
Europe, the Middle East, Africa and South America, according to
the ministry paper presented to Friday's hearing.

Due to tighter competition nowadays in international trade,
Indonesia cannot rely too heavily on its traditional markets,
such as the U.S. and EU.

The paper also said that the government would create a more
supportive business climate by, for example, reducing the red
tape on import procedures.

The paper also said the government would draft a trade bill to
ensure legal certainty in doing business in Indonesia.