Indonesia’s plan to introduce new import tariffs on items like clothing and cosmetics is not the answer for local industries struggling to grow, the head of a major local business group, said in an interview in Tokyo.
Indonesian trade minister Zulkifli Hasan said in late June that the country would impose safeguard duties of 100% to 200% on imported footwear, clothing, textiles, cosmetics and ceramics to protect domestic micro, small and medium enterprises (MSMEs), facing competition from manufacturers in countries such as China and Vietnam.
“The [minister’s] spirit is good for the industry, … but [it is] not the solution,” Arsjad Rasjid, chairman of the Indonesian Chamber of Commerce and Industry, told Nikkei Asia on July 3 during his visit to Tokyo, adding that the government’s approach goes “against the market.”
Although he acknowledged the need to protect local businesses, he said, “We are not against imports.”
“The key is governance,” rather than protectionism, to help grow Indonesian MSMEs, Rasjid said, calling for tighter controls on illegal imports coming to Indonesia and harming local businesses, “so that there is a fair competition.”
MSMEs account for 60% of Indonesia’s gross domestic product and play a key role in the country’s development. Rasjid said his organization will include suggestions to support MSMEs in a white paper it is compiling, which will include proposals to the new government that will be inaugurated in October. President-elect Prabowo Subianto has vowed to raise Indonesia’s economic growth to 8% per year, much higher than the current rate of around 5%.
Regarding the Indonesian economy, Rasjid highlighted the importance of skills development and providing enough jobs for the country’s growing working-age population, especially as digitization affects jobs in some sectors. “We don’t want to see the so-called [demographic] bonus becoming a liability,” he said.
Rasjid said that, during his Tokyo trip, he would ask large and small Japanese companies to bring in more skilled workers from Indonesia. Japan already has an economic partnership agreement with Indonesia under which Indonesian nurses can work in Japan. Rasjid suggested there is room for more collaboration in areas such as in agriculture, given the aging of Japan’s farmers.
In addition to sending laborers to other countries, “We have to make sure we keep certain sectors as labor intensive,” Rasjid said.
He also stressed the importance of the private sector and foreign investment to speed Indonesia’s growth, saying his country is open to all investments that bolster the country’s efforts to create an electric vehicle ecosystem. “The initiator investment was Chinese, but that is why Indonesia wants others to come,” said Rasjid.
Japanese small and medium enterprises already in the automotive supply chain in Indonesia can expand into the EV industry, said Rasjid, whose numerous titles include the president director of energy company Indika Energy. But, he pointed out, “[Japan’s] large corporations make decisions very slowly. That is one of the key factors that Japan needs to change.”
Rasjid said more investments should be made in Indonesia’s new capital. In August, President Joko Widodo plans to shift some functions from Jakarta to Nusantara, a new city being built in East Kalimantan on the island of Borneo.
There is a need to “create more connectivity from this towards the whole of Borneo,” such as with railway and gas pipelines, he said. Other areas, such as R&D and education, can also develop in the new capital, he suggested.
Borneo is divided between three countries: Indonesia, Malaysia, and Brunei. Nusantara can become “a center of growth, not only for Indonesia but also for Borneo, in which it is for ASEAN also,” Rasjid said.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.