JAKARTA (TheInsiderStories) – The Rupiah weakening become Indonesian government concern amid the trade war and other international and domestic issues. In months, the local currency has dropped significantly and could hurt the domestic economy.
On Thursday (26/07), President Joko Widodo invited Indonesian Chamber of Commerce (ICC), Association of Indonesian Entrepreneurs (AIE) and conglomerates to Bogor Palace discussing the latest economic development in the country.
The number of national tycoons meet with Widodo including Djarum group owner Budi Hartono, owner of Rajawali Corpora Peter Sondakh, Boss Garuda Food Group Sudhamek AWS, President Director Adaro Energy Tbk Garibaldi Thohir, Owner of Medco Group Arifin Panigoro, and Wings Group Leader Eddy William Katuari.
According to ICC’s chairman Rosan Perkasa Roeslani, president wants the entrepreneurs put the money from its exports to Indonesia. Based on the government data, he said, only 15 percent of export earnings were placed in Indonesia.
“We are asked, these businessmen willing not to put the money in Indonesia exchange to Rupiah for currency strengthening. Certainly from the business world because of this for the good will we follow up,” he remarked after meeting with president Widodo at the Bogor Palace.
He added, the exporters is planned to be called one by one with each ministry to heard their concerned on the government policy.
In the meeting, the President also discussed with the entrepreneurs how to increase investment in the archipelago and what are the constraints. He stated; “For example fiscal with Sri Mulyani (finance minister), investment by investment coordinating board and others. One on one will find a solution.”
From the businessmen side, Roeslani explained, the reason the employers keep the foreign exchange to pay debt, working capital, buy raw materials and other expenses.
Meanwhile Finance Minister Sri Mulyani Indrawati stated, that president encourages the entrepreneurs to stay focused on their business and increases their exports. President stressed it with the competitiveness, the businessmen can overcome the strengthening of the dollar and at the same time use it to take it an opportunity, she said.
At the meeting, the President also said he would like to hear input from businessmen related to a number of policies that have been issued by the government.
Recently, the government has announced eight strategies to counter the trade war imposed by the United States will eventually affect Indonesia. The United States government is reported evaluating the existence of a generalized system of preference (GSP) given to products from Indonesia.
Following a trade deficit with Indonesia, the U.S’s President Donald Trump threatened to impose a 124th tariff on Indonesian products. In 2017, Indonesia booked US$9.59 billion trade surpluses with the US.
GSP is a US platform to provide import duty exemption for exporters from developing countries. In 2011 Indonesia is one of the five countries that enjoy the greatest benefits of this GSP together with India, Thailand, Brazil, and South Africa.
Since April, the United States has been reconsidering the provision of the facility to Indonesia and India, especially with market access of American goods had been restricted in the two countries.
Senior Advisor to Indonesia’s Vice President Sofjan Wanandi said that a removal from the GSP list would cost Indonesian exporters at least $1.8 billion in additional tariffs.
Industry Minister Airlangga Hartarto said the Indonesian government has designed eight strategies to respond to the trade war threat. First is fiscal revenue optimization by applying export duties and import duties in order to improve industries competitiveness.
In addition, the government ensures the availability of raw materials and incentives for the industries to encourage exports. Furthermore, the government also will give incentives for industries seeking to relocate its factories from the labor-intensive area such as West Java to the other areas such as Central Java.
The government also commits to provide incentives for the small medium enterprises in furniture sectors to boost export, such as by subsidizing Timber Legality Verification System.
In addition, the government will improve the domestic content level for industrial utilization in order to meet the availability of raw materials including petrochemical and fuel corporations in Tuban, East Java.
Furthermore, the government will boost the using of biodiesel in order to increase the consumption of crude palm oil by 500,000 tons per year. Last, the government will maximize the tourism by developing low-cost carrier.
However, the strategies are more general in view of the nation’s persistent trade deficit and not specific measures to respond to the threat of trade war. Indonesia booked $2.83 billion in deficit trade balance from January to May 2018.