New import policies to protect industries fruitless, experts say
Adianto P. Simamora, The Jakarta Post, Jakarta
New measures to protect local industries with tighter import policies have won praise from industry players, but experts doubt their effectiveness and said the government should instead help industries reduce their inefficiencies.
Unless the government takes concrete action to help rejuvenate local industries and make them more efficient and competitive, all the protective measures will be in vain, the experts said.
"We are allowed to take protective measures for ailing industries, but it will all be fruitless if there is no concrete action to rejuvenate the industries," Pande Radja Silalahi, economist at the Centre for Strategic and International Studies (CSIS), told The Jakarta Post over the weekend.
In a bid to curb the influx of imported goods into the country, the Ministry of Industry and Trade has issued several decrees over the last three months to raise import tariffs on sugar, steel and polypropylene, and to limit the number of importers of textile, steel and sugar by barring nonproducers from importing the goods.
The latest move by the ministry was to propose President Megawati Soekarnoputri sign a presidential decree on safeguard measures. The ministry has sent the draft decree to Megawati and the President is expected to sign it sometime this month.
Under the safeguard measures, which are allowed by the World Trade Organization (WTO), the government can impose higher import duties on certain products on a temporary basis if imports enter the country in such numbers and so quickly that they threaten the survival of local industries.
Almost all WTO members have such a safeguard regulation.
Pande said all the protective measures, including the safeguard action, were merely short-term solutions, and that the government should create policies that will empower local industries for the long term.
Industry players have long complained about unnecessary and often illegal fees imposed on them, which have become worse with scores of overlapping tax regulations since the implementation of regional decentralization last year.
Industries that need restructuring so that they can remain competitive face a barely recovering banking sector, which is reluctant to lend. In addition, capital from other sources is hard to come by, amid a poor investment climate and a private sector crippled by a mountain of bad debts.
Pande also called on the government to be careful in selecting industries worth protecting. "We don't need to protect inefficient industries such as sugar," he said.
Ine Minara Ruki, economist at the University of Indonesia, said the government had taken measures to protect several industries without understanding their true situations.
Ine urged the government to establish clear criteria for which industries and commodities deserved protection.
"Each industry has different problems, so the government must study the performance of industries and commodities before imposing protective measures," Ine told the Post.
However, Indra Ibrahim, executive director of the Association of Indonesian Textile Producers, hailed the government's new protective policies, and expressed hope the safeguard mechanism could be implemented as soon as possible for the textile industry.
"The safeguard mechanism will be very effective in helping to reduce the influx of cheaper imported textile products, especially from China," Indra said.
Textile players have long complained that cheap imports are cutting into their earnings.
Farukh Bakri, chairman of the Indonesian Sugar Association, blasted the government's sluggishness in introducing the safeguard mechanism to protect the local sugar industry.
"We need protection, as do other countries. Indonesia is one of the countries with the lowest import duty," Farukh said.