Govt Tests Five Export Policies

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JAKARTA, KOMPAS — The government is trying to improve export competitiveness through five short-term policies that are being tested amid global uncertainties.

The five policies currently being implemented to increase export competitiveness in 1-3 years are: improving the business climate through the Online Single Submission (OSS) electronic licensing system, tax incentives, vocational programs, simplifying procedures to reduce export costs and selecting primary commodities.

"Three preliminary policies have been implemented since 2018. After the supply side is resolved, we will have a foundation for going forward with logistics and improved industrial performance," Coordinating Economic Minister Darmin Nasution said in Jakarta on Tuesday while presenting the 2019 Economic Projection.

According to Darmin, this year’s policy focused on simplifying procedures to reduce export costs and selecting primary export commodities. Export costs were to be reduced by eliminating the critical export problem of logistics. More concretely, the solution was to improve the logistics infrastructure that had been in place for the last four years. "Infrastructure will be integrated with a digital system," he said.

Finance Minister Sri Mulyani Indrawati said that the Customs and Excise Office had initiated logistical reform by launching the Third Generation Manifest System, which digitalized the entire process of submitting and changing import and export manifests to shorten dwelling times and logistical costs.

Improving export competitiveness was not easy and would not be resolved overnight. "This is not only a matter of money or fund allocation, but about coordination between the central and regional governments and among ministries," Sri Mulyani added.

The results of the Directorate General of Customs and Excise’s trial showed that pre-clearance loading and unloading times and preparing container warehousing documents could be reduced from 2-3 days previously to 0.81 day. This would in turn reduce logistical costs.

Processing documents was also faster, from 5-6 hours in the previous manual process to 15 minutes using the online system. In addition, the process of itemizing 11,500 documents per month was also eliminated.

Primary commodities

As for selecting primary export commodities, the government is prioritizing high added-value commodities, in part by increasing investment in related industries.

The five leading industries that have been added to the Industry 4.0 roadmap are the chemical, textiles and textile products, electronics, automotive, and food and beverage industries. Other industries such as fishing, machinery, medical equipment, furniture, and wood and paper products could also be included in the roadmap.

Industry Minister Airlangga Hartarto said the government was also introducing incentives to encourage exports, including a mini tax holiday for labor-intensive businesses.

Finance Minister Regulation No. 150/2018, issued at the end of November 2018, stipulates provisions for the mini tax holiday. The tax holiday offers a 50 percent reduction in corporate income tax to companies with investments of Rp 100 billion to Rp 500 billion.

Meanwhile, the incentives for export and labor-intensive businesses include tax reductions and easing export procedures.

Challenges

The government initiated the five policies to address the decline in export performance. According to Statistics Indonesia (BPS), Indonesia recorded a US$7.52 billion trade deficit in January-November 2018, the highest figure since January 2014. Before then, the widest trade deficit was $4.1 billion in January-December 2013.

Global economic uncertainties are expected to continue this year. The US-China trade war, as well as low prices for the main export commodities, will continue to hamper global trade.

Indonesia\'s deficit in the balance of trade is also projected to continue due to weak global demand and poor competitiveness. "If we look at the economic growth projection for the main export destinations in 2019, almost all show slower growth, including the United States," said economist Muhamad Faisal at the Center of Reform on Economics (CORE) Indonesia.

The condition was partly due to impacts from the US-China trade war, besides which low commodity prices also contributed to the trade deficit. According to Faisal, the downward trend in commodity prices would continue in 2019, albeit at a slower pace.

In fact, 55 percent of non-oil and gas exports depend on commodities such as palm oil, coal and rubber. As a producing country, Indonesia does not have a significant influence on global prices. The government’s strategy is to increase export penetration to countries other than China and the US.

Businesspeople expect the government to synchronize regulations to optimize investment and drive industrial contributions.

Indonesian Food and Beverage Producers Association (Gapmmi) chairman Adhi S. Lukman said that the government must be more intensive in evaluating regulations that hampered exports amid the tightening global competition.

Competence and labor productivity must also be increased. "On the other side, businesses must also be more active in product innovation and looking for alternative raw materials," he said. (KRN/DIM/LAS/CAS)

Editor:

2019 economic projection