Wednesday, 22 June 2011

Goverment Policy Encourages Producers To Change Role To Traders

The industries complain about government policies which do not favor them. Policy of import duty is considered to reduce competitiveness of domestic products and will finally encourage producers to shift role to importers or traders. Chairman of Indonesian Young Entrepreneurs Association (HIPMI), Erwin Aksa, regrets about government policy in industry which does not favor producers. Consequently, producers change role to traders which are considered more profitable. He gave an example of import duty policy where the government imposes import duty on raw materials not produced domestically, while finished products are exempted from import duty.

According to Erwin, the potential change of role to traders has been evident. Moreover, if it is not accompanied with incentive policy that could boost industrial growth. While, in fact, there is a rampant inflow of Chinese products. Erwin said that the application of ASEAN-china Free Trade Agreement (ACFTA) has forced domestic players to come face to face with industries from a country which is designed to supply global demand.

Survey the ministry of industry on national businesses and consumers shows that domestic products started to decrease. While, many domestic industries are supplying to meet demand of one country. While, Chinese industries receive and tax reduction. “in such a condition, it is understandable if many national business will change role to importers. By becoming importers, they will not bear any business risk”, he said.

Erwin regretted the attitude of the business or producers who recently changed role to importers of products from china and india. Local producers should be the host for domestic products. He predicted that import of Chinese and Indian products will probably become a trend in 2011. He explained that producers who changes role to  trades are mostly small and medium businesses. Many of the imported products sold are garment, handicraft, food and beverages, and furniture.

The above condition confirms that de-industrialization could happen in the future. Erwin explained that currently, Chinese industries experience overproduction as its main markets, namely United States, Europe, and Japan are in sluggish condition. In addition to boosting domestic consumption, China also seeks new potential markets, and one of them is Indonesia. So, flow of cheap products from china will increasingly flood the Indonesian market.

To curb the shift of role from producers to traders, according to Erwin, the government must determine the direction of the national industries. He also explained that raw material guarantee and capital access will significantly affect the success of domestic industries. Moreover, bank interest rates domestically are high if compared to China. Guarantee of market and commitment to use local products are also necessary.

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