JAKARTA (TheInsiderStories) - Indonesia government will issue a presidential decree to improve the policy of local content level to reduce imports as well as developing import substitution industry, senior official said.
Coordinating Minister for Maritime Affairs, Luhut Panjaitan said, the regulation will replace current local content regulation which is only limited and separate at the ministry or agency level. Hopefully, the policy can be implemented consistently with new rule, He added.
“The president has emphasized that all domestically produced products should be used in order to build our industry.” Luhut said at the State Palace on Tuesday (1/8).
According to Him, the government policy to attract investment, both derived from state budget and state-owned enterprises (SOEs), should be able to encourage industry growth. Later, the rule will provide sanctions for ministries or agency and SOEs that do not apply local content rules.
Vice Chairman of Indonesian Chamber of Commerce and Industry (KADIN) Indonesia Bambang Sujagad stated, that infrastructure development in Indonesia could be a blessing for domestic industry if local content policy can be applied consistently.
The allocation of infrastructure spending in Revised State Budget 2017 is almost Rp400 trillion while SOE’s capital expenditure reaches Rp550 trillion. Bambang said, if the local policy can consistently reach at least 35 percent, then the national industry will have market around Rp330 trillion.
Ministry of Energy and Mineral Resources (ESDM) became one of the highlighted by President related to the implementation of local content. Minister Ignasius Jonan said, the portion of local content in the oil and gas and electricity sectors is varies, but the largest is in the upstream sector of oil and gas. Since 2011, the share of local content in upstream oil and gas is at the level of 55-60 percent.
Jonan argues, the implementation of local content can not be forced, but it must be given incentives. He pointed out that the gross split scheme in the upstream oil and gas sector that will be applied will provide incentives to contractors that applying local content rules.
“We support local content regulation as long as the product price is reasonable. If it is produced in Indonesia and the price is much more expensive than produced in abroad, we may hesitant its use local content,” he said.
Director General of Oil and Gas at the ESDM Ministry IGN Wiratmadja Puja added, that the ministry has a local content policy roadmap in the upstream oil and gas sector. He also mentioned, there is still an opportunity to increase the use of domestic products.
“For example, the pipeline, until now around 50 percent. We targeted it will increase to 80 percent in the period of 2021-2024. The electrical pump is also just 35 percent using local products,” he said.
Meanwhile, President Director of PT Pertamina Elia Massa Manik claimed the use of local in the state-owned energy firm, especially upstream oil and gas has reached 70 percent. However, he said, not all domestic products can meet the needs of Pertamina.
“Sometimes we need high technology so we have to import,” he said.
Based on the data of Ministry of Industry, the average portion of local content in SOE’s has reached 70.64 percent. However, there are a number of SOEs that have low portion of local content use compared to other SOEs such as PT Rekayasa Industri (47.84 percent), PT PAL Indonesia (Persero) (51.20 percent) and PT Wijaya Karya Tbk (55.85 percent ).
President Joko Widodo again warned the ministry and SOE’s to apply local content policy consistently. He said he would continue to monitor the use of local content through the State Development Finance Comptroller and other ways. (DS/ES/RF)
