Indef Advocates for Export-Driven Growth Amid Import Constraints

JAKARTA – While import restrictions (Lartas) may appear to bolster Indonesia’s trade surplus, the Institute for Development of Economics and Finance (Indef) warns that such measures only generate superficial gains. Indef suggests that the government’s focus should shift towards enhancing exports rather than impeding imports, especially those essential for industry raw materials and auxiliary needs. Andry Satrio Nugroho, Head of the Center of Industry, Trade, and Investment at Indef, emphasized the importance of cautious implementation of import restrictions outlined in Minister of Trade Regulation 3/2024 to avoid disrupting manufacturers’ access to raw materials. “Improvements are needed in this area, as a decline in raw material and capital goods imports may result in a trade surplus, but it would lack substance,” Andry told Bisnis on Wednesday (17/4/2024). According to Andry, the government should focus on enhancing export trading frequency, which can bolster foreign exchange reserves while also enhancing competitiveness and the quality of export-oriented products. Despite this, the government is also striving to sustain the trade surplus streak, which has lasted for 46 consecutive months since May 2020, amidst the looming global economic slowdown. Data from the Central Statistics Agency (BPS) reveals that Indonesia’s trade balance in February amounted to US$0.87 billion, marking a 56.93% month-to-month (mtm) decrease from US$2.02 billion. Annually, it plummeted by 83.89% in February 2023, amounting to US$5.40 billion. Indonesia’s export value stood at US$19.31 billion in February 2024, marking a 5.79% decrease compared to the previous month’s US$20.49 billion. Meanwhile, Indonesia’s import value in February 2024 amounted to US$18.44 billion, a 0.29% decrease from the previous month’s US$18.49 billion. “A surplus resulting from decreased imports is meaningless. Our goal should be a trade surplus driven by significant export growth. High imports are acceptable, as long as they are for raw materials or capital goods, not consumer goods,” he explained. In fact, imports of raw materials and auxiliary goods decreased by 4.23% mtm in February 2024 to US$1,087.2 million, and capital goods decreased by 14.20% mtm to US$812.5 million. Meanwhile, imports of consumer goods increased by 22.73% mtm to US$672.9 million.