6-7-2024 (JAKARTA) The chairman of the Indonesian Chamber of Commerce and Industry has questioned the wisdom of Indonesia’s planned introduction of steep import tariffs on various consumer goods, arguing that such measures may not be the panacea for struggling local industries.
Arsjad Rasjid, speaking to Nikkei Asia during a visit to Tokyo, responded to recent announcements by Indonesian Trade Minister Zulkifli Hasan regarding the imposition of safeguard duties ranging from 100% to 200% on imported footwear, clothing, textiles, cosmetics, and ceramics. The proposed tariffs aim to shield domestic micro, small, and medium enterprises (MSMEs) from intense competition, particularly from manufacturers in China and Vietnam.
While acknowledging the minister’s good intentions, Rasjid cautioned that this approach might be misaligned with market forces. “The [minister’s] spirit is good for the industry, … but [it is] not the solution,” he stated, emphasising that the business community is “not against imports” per se.
Instead of resorting to protectionism, Rasjid advocated for improved governance and stricter controls on illegal imports that harm local businesses. He stressed the importance of creating “fair competition” to foster growth among Indonesian MSMEs, which currently contribute to 60% of the country’s GDP.
The chamber is preparing a white paper with recommendations for the incoming government, set to take office in October. These proposals will include strategies to support MSMEs and align with President-elect Prabowo Subianto’s ambitious goal of boosting Indonesia’s economic growth to 8% annually, a significant increase from the current 5% rate.
Rasjid highlighted the critical need for skills development and job creation to harness Indonesia’s growing working-age population effectively. He expressed concern about the potential negative impact of digitalisation on certain sectors, stating, “We don’t want to see the so-called [demographic] bonus becoming a liability.”
During his Tokyo visit, Rasjid planned to engage with Japanese companies, both large and small, to explore opportunities for increased collaboration. He suggested expanding the existing Economic Partnership Agreement, which allows Indonesian nurses to work in Japan, to include other sectors such as agriculture, given Japan’s ageing farming population.
The business leader also emphasised the importance of private sector involvement and foreign investment in accelerating Indonesia’s growth. He welcomed investments that support the country’s ambitions to develop an electric vehicle ecosystem, noting that while Chinese investments have been pioneering, Indonesia is keen to attract a diverse range of international partners.
Rasjid pointed out that Japanese SMEs already operating in Indonesia’s automotive supply chain could expand into the EV industry. However, he observed that larger Japanese corporations tend to be slower in decision-making, suggesting this as an area for improvement.
The discussion also touched on Indonesia’s new capital, Nusantara, with Rasjid advocating for increased investment in infrastructure and connectivity across Borneo. He envisioned Nusantara not just as Indonesia’s new administrative centre, but as a potential hub for research, development, and education that could drive growth throughout the ASEAN region.
