Indonesian import tariff increases applauded

Indonesian Textile Association chairman Ade Sudrajat said the tariff increases would be beneficial to the domestic manufacturing industry, allowing fairer competition between locally made and foreign goods.
“This may help push up sales of local products amid the ongoing economic downturn,” Ade said.
As stipulated by a regulation signed on July 8, import duties on consumer goods from processed food to vehicles have increased by 30 per cent, with exceptions for special products, such as alcoholic drinks, which will see hikes of up to 150 per cent.
The arrangement is part of attempts to harmonise tariffs by imposing higher duties on finished products and lesser duties on raw materials and intermediate goods.
In the textile industry, significant production costs caused by higher energy expenses and labour wages hinder competition with cheaper imports.
As with producers across a number of business sectors, textile manufacturers have felt the major impact of higher costs and weak demand. Indonesia’s gross domestic product expanded by only 4.7 per cent in the first quarter, the lowest rate in nearly six years.
The textile industry trimmed production by 20 per cent in the first quarter of this year and maintained low output through the second quarter, decreasing factory utilisation.
Adhi S Lukman of the Indonesian Food and Beverage Association expressed a similarly positive response to the duty rises, describing the measure as “one step forward” to revise the inharmonious tariff system. It could also provide leverage to the local food and beverage industry by pushing up sales and encouraging production, thereby lowering costs, he said.
“I think with wider use of local products, domestic consumption will pick up and industrial capacity will also expand,” he said.
Sharing Ade’s expectation, Adhi said the new policy might help increase sales in the second half of the year after disappointing growth in the first half. Textiles, food and beverages are among hundreds of products that will be charged higher import duties. Textile products, including T-shirts, used clothes and corsets, will be levied between 22.5 and 35 per cent, while food and beverage products, such as processed meat, candy and cookies, will be charged up to 30 per cent. Alcoholic drinks will be imposed with duties up to 150 per cent.
At present, Southeast Asia’s largest economy places modest duties on foreign goods at an average of 6.8 per cent, lower than other emerging economies such as China (9.6 per cent), Brazil (13.7 per cent) and India (13 per cent).