Although the Ministry of
Industry continues to implement the national industrial development with main
objectives, among others, growth of non-oil and gas processing industry of 6.1%
to 6.8% this year, a number of parties expressed diverse opinions. According to
researchers from the Economic and Social Research institute of the University
of Indonesia (LPEM-UI), Erna Zetha Rusman, with economic growth in 2014 only at
5.02%, the demand from the national side will also be low. If consumption is
low, then national production is also low, he told Business News, Monday
(February 9).
“Although the government provides a variety of additional
stimulus, we hope that his will increase Government spending. Then we will see
the direction of the Government spending. For example, whether the provision of
stimulus and government spending will spur consumption or not. If it spurs
consumption, then it is helpful, but I have not seen it that way, because
currently the selling price of the product and basic necessities are increasing.
When deflation occurred in January due to the rise and
fall of fuel prices, it does not have an impact in term of production costs.
Input factor of products are from imports, because of the dollar exchange rate
against the rupiah also rose. Most raw material of manufacturing industry are
by imports. In addition, the load interest rate is high, the government and the
central bank will set BI rate still at 7.75%. I do not see any signs of
reduction of interest rates in the country. Moreover, there are symptoms that
the United States will increase. The Fed rates, so that it is unlikely that BI
rate will increase. With high domestic interest rate, the loan for investment
is still high, then the procurement cost of the industry will be expensive.
Economy slowing, Growth of
Processing Industry is also slowing.
Based on data from the central statistical Bureau (BPS),
the achievement of economic growth in 2014 is not encouraging compare to the
last five years. It only reached 5.02%, the government missed the predictions,
i.e. 5.1%. Slowing economic growth was also followed by the decline of
processing industry growth, which in 2014 only grew around 4.6% and its
contribution to GDP is about 21%.
Relatively to the achievement of economic growth which
only grew 5.02%, there is a correlation between processing industry growth in
2014 and the declines in the aggregate growth of household consumption
expenditure, which fell from 5.38% in 2013 to 5.14% in 2014. This is affected
by a sharp decline in government expenditure in 2013 from 6.93% to 1,98%,
industry and trade observer, Fauzi Aziz, told Business news.
While, the growth of Gross
Fixed Capital Formation (GFCF) also decreased from 5.28% to 4.12%. Export
growth also declined sharply in 2013 from 4.17% to 1.02% in 2014. Other factors
that affect the decline in growth of the processing industry are purchasing
power due to the slowdown in growth of GDP per capita of Indonesia society. In
year 2012 the value reached USD 3,751.38, fell to USD 3,669.75 in 2013 and in
2014 fell to USD 3,531.45.
We can understand that the slowing growth of the
processing industry in the country in 2014 was due to the weakening market
conditions in the country, investment (GFCF) also decreased, and exports of
goods and services also fell. Economics logic says that if data on the macro
level had decreased, the conditions on the micro level are also decreasing.
Conditions in 2015 became a bit heavy because it is not
easy to improve the macro performance where almost all components that contribute
to expenditure growth are decreasing. The cause of the weakening growth of the
processing industry which occurred in 2014 is not a single factor and
sectorally it slowed due to unfavorable macroeconomics performance, both
internally and externally.
Attempts should be done by the government, must be
realized as soon as possible so that the macro or micro/sectoral growth target
that has been set by the government and by each ministry/agency in 2015 is not
too far from the projections. Slowing down of processing industry growth could
not be overcome by the ministry of industry because only about 30% which is
under its responsibility and the remaining or approximately 70% is the
authority of other ministries.
There are four policy issues that must be resolved by the
government in a coordinated manner, namely 1) The increase in business volume
in the domestic market, including relaxation on procurement of government goods
and services from domestic production; 2) perform a more comprehensive export
promotion strategy that included trade diplomacy and export incentives; 3)
accelerate realization of physical investment so that GFCF growth will improve;
4) Conduction import controls effectively. The government needs to carry out
deregulation and de-bureaucratization policy which gives relaxation to rescue
the national economy. (E)
Business News - February 13, 2015
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