JAKARTA: Indonesian government has decided to raise import duties on all kind of finished goods to give a supportive hand to its economy while keeping the import duties rates of other countries into mind. For emerging economies, the tariffs are usually of significant use, serving as a means to manage imports and provide room to expand particular industrial sectors.
Indonesia currently places a 6.8 percent import duty on foreign goods, lower than other emerging economies like China (9.6 percent), Brazil (13.7 percent) and India (13 percent).
Under the most favored nation rule, the World Trade Organization (WTO) allows its members to apply import duties of up to 40 percent.
Indonesia currently places a 6.8 percent import duty on foreign goods, lower than other emerging economies like China (9.6 percent), Brazil (13.7 percent) and India (13 percent).
It also imposes a 6.6 percent import duty on average for industrial goods, less than China (8.7 percent), Brazil (14.2 percent) and India (10.10) percent.
The government is assessing the possibility of raising import duties on a wide range of finished goods as part of its efforts to harmonize its tariffs.
The potential hike will cover 741 out of over 10,000 existing tariff codes in the current customs system, comprising textiles, downstream chemical products, base metals and vehicles, according to Industry Ministry’s director of Industry Climate and Quality Policy Research Center Haris Munandar.
“The step will support our goal to reach an ideal tariff system where [imported] finished products are charged with higher duties compared to raw materials or intermediate goods,” he told The Jakarta Post.
When all the tariffs are harmonized, Haris said, the system would provide the appropriate treatment for the upstream as well as the downstream industries, providing both sufficient room to grow.
In stark contrast to its advanced move to cut down on tariffs in a liberal way, Indonesia’s competitiveness index of 4.38 percent is lower than countries applying higher import tariffs, such as China (4.9 percent).
Indonesian Institute of Sciences (LIPI) economist Latif Adam said that the step taken by the government was a much-needed one to help the country improve the competitive edge of its domestic industry.
The relatively low import duties have given finished goods from overseas a better competitive edge in Indonesia, Latif said. In fact, Indonesia still sees inefficiency as the country is still struggling with labor productivity and the use of technology in manufacturing.
However, he added, the measure should come along with some other conditions, such as pushing down import tariffs for raw materials to a very low level, and ensuring that products come from closely connected trading partners. The countries that do not have free trade agreements with Indonesia should be subjected to higher tariffs.
