World Bank fears RI measures to slow import growth
World Bank fears RI measures to slow import growth
JAKARTA (JP): The World Bank has expressed concern that Indonesia might use distortionary measures to slow import growth from its present level of more than 30 percent to about 11 percent during the next fiscal year.
"We wouldn't like to see the Indonesian government reimposing high import tariffs or adopting a direct intervention to reduce import growth," Dennis de Tray, the director of the World Bank in Jakarta, told the Jakarta Post here yesterday.
The government recently unveiled its budget plan for the next fiscal year (1996/1997), which, among other things, plans to cut the country's import growth from 32 percent to 11 percent and to boost exports of non-oil products by 19 percent to narrow the current account deficit.
Most economists, however, are pessimistic that the government will be able to cut down imports so sharply and still keep the economic growth rate above 7 percent.
De Tray stated: "I think this is an ambitious plan. It is feasible but we're worried that the government will choose a direct intervention in its import management."
He said he's already noticed some signs of imports declining. "But our concern is that import growth continues to rise at a high level driven by high economic growth."
According to De Tray, the increase in imports is a natural outcome of the rapidly growing economy.
Analysts add that the rising number of middle-class consumers has increased the demand for more goods and services that are not available locally.
"This certainly will increase imports," De Tray pointed out.
He added that investment expansion has also contributed to import growth because the country still depends mainly on imported capital goods.
Indonesia further liberalized its import regulations last May and as a consequence has seen an increase in import activity. "As a result of the May deregulation it is temporarily cheaper to import," he said.
According to the World Bank executive, the government should give top priority to development projects and other investments that will increase export capacity.
He called on the government to maintain its tight money policy to lower its current account deficit which is estimated to reach $7.9 billion in the current fiscal year, ending in March.
"The central bank here should also keep its interest rates high, despite the fact that there has been a downward trend of interest rates in the United States."
He said that the World Bank would monitor Indonesia's ambitious plan to arrest rapid import growth.
Meanwhile, Minister of Industry and Trade Tunky Ariwibowo acknowledged here yesterday that Indonesian industries are very much dependent on imported raw materials and components.
"We see the relocations of plants from countries such as Japan and South Korea -- but only their assembling units and not their component making units," he said at a meeting organized by the Indonesian Chamber of Commerce and Industry.
He cited the electronics industry as an example. The increase in electronic exports is always accompanied by a rise in imports.
The condition, according to De Tray, is getting worse due to the fact that many electronic products which should be exported -- especially those made by foreign companies -- are often sold on the domestic market. (13)