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.