Grow­ing pro­tec­tion­ism hurt­ing In­done­sia: re­searchers


A re­port by two lead­ing In­done­sian re­searchers ar­gues that grow­ing pro­tec­tion­ism by In­done­sia Pres­i­dent Joko Wi­dodo’s gov­ern­ment is dam­ag­ing an econ­omy al­ready grow­ing at its slow­est pace for the past five years.

The study, spon­sored by the re­spected Lowy In­sti­tute in Aus­tralia, says new re­stric­tions on for­eign in­vest­ment and trade will “drive up prices for In­done­sian con­sumers at a time when their pur­chas­ing power is de­clin­ing, and un­der­mine the com­pet­i­tive­ness and pro­duc­tiv­ity of In­done­sian firms.”

Sjamsu Ra­hardja and Arianto Patunru, based at the World Bank and Aus­tralian Na­tional Univer­sity re­spec­tively, say that for­mer In­done­sian fi­nance min­is­ter Muhamad Chatib Basri’s old adage that “the good times make for bad pol­icy and the bad times make for good pol­icy” has been turned on its head by Joko’s gov­ern­ment.

In this case, “the bad times make for bad pol­icy,” they wrote.

The re­port comes two days af­ter Joko’s trip to Sin­ga­pore where he wooed for­eign in­vestors, say­ing that In­done­sia needs for­eign in­vest­ment and that the best time to in­vest is now.

But econ­o­mists are less im­pressed, point­ing out that what is said to in­vestors of­ten clashes with what is prac­ticed.

The re­port, which tracked In­done­sia’s ma­jor eco­nomic poli­cies from the 1960s un­til now, noted that while the coun­try had en­tered into free-trade agree­ments with ASEAN na­tions and other ma­jor trad­ing part­ners, it had also un­veiled a raft of pro­tec­tion­ist mea­sures over the years.

This year, In­done­sia’s Man­power Min­istry im­posed re­stric­tions on the use of for­eign pro­fes­sion­als and Cab­i­net min­is­ters talk openly about re­sist­ing the im­ple­men­ta­tion of ASEAN Eco­nomic Com­mu­nity (AEC) re­forms, with months to go be­fore the AEC takes ef­fect early next year, it noted.

Among the mea­sures are re­quire­ments for a higher per­cent­age of lo­cal con­tent in ex­ports and the rais­ing of im­port tar­iffs on a raft of prod­ucts ear­lier this month.

The use of non-tar­iff mea­sures has also in­creased, the re­searchers said, cit­ing the in­ter­na­tional Global Trade Alert re­port that ranked In­done­sia among the worst of­fend­ers for in­creas­ing pro­tec­tion since the global fi­nan­cial cri­sis.

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