Indonesia wants to boost domestic production

Indonesia wants to boost domestic production

Indonesia has reportedly raised import duties on groups of consumer goods products.

According to Reuters, Jakarta has upped duties in a bid to help domestic manufacturers.

The tariff on meat has been taken from 5% to 30%. The duty on imported tea and coffee, which was also 5%, has been increased to 20%.

Suahasil Nazara, the head of the fiscal policy office within Indonesia's finance ministry, said the move was to help domestic production and not simply to raise revenue.

"This isn’t a policy to boost revenue," Nazara reportedly told local media, according to Reuters yesterday. "We are facing a challenge in our industrialisation. Our domestic industry hasn’t expanded as fast as it had 15 to 20 years ago."

Nazara said the increase in tariffs would affect about one percent of all imports, ensuring near zero inflationary pressure from the policy, Reuters reported.

Inflationary pressures will be low because the rule exempts countries with which Indonesia has trade agreements, said Haris Munandar, head of industrial research at the industry ministry, the news agency added.

For instance, Indonesia's agreements with other nations in South East Asia set zero tariffs on imports.

In The Jakarta Post, Adhi S. Lukman, chairman of the Indonesian Food and Beverage Association (GAPMMI), said the move was "one step forward" and could benefit the local food and beverage industry by pushing up sales and encouraging production, thereby lowering costs.

"I think with wider use of local products, domestic consumption will pick up and industrial capacity will also expand," he said.

However, elsewhere, Indonesia's move was questioned by some economists.

"This is naked protectionism," said Gareth Leather, an economist at Capital Economics, was quoted as saying by The Financial Times. "They want to try to help domestic producers . . . but it goes against everything you see in textbooks about opening up the economy to competition so domestic producers thrive."