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save its forex reserves and maintain them at a healthy level in order to boost investor confidence after Indonesia had withdrawn from the IMF program at the end of this year.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.