In a statement released by Minister of Cooperatives and SMEs Teten Masduki on Tuesday (24/10/23) Indonesia’s import substitution policy is one of the four economic policies aimed at strengthening locally-made products, including those produced by Micro, Small, and Medium Enterprises (MSMEs), according to reporting from Antara News.
“The President has even affirmed that 40-percent of the state budget (APBN) spending will be allocated to purchase domestic products from MSMEs,” he said.
Through the import substitution policy, Indonesia will no longer need to import products if it can make them to meet domestic needs, Masduki stated, adding that products made by foreign companies in Indonesia should have a domestic component level of 40-percent. They are also obligated to partner with local business players, say Antara News.
The second policy to protect local business players is the downstreaming and industrialization of natural resources.
Masduki emphasized that the policy is not only for large-scale business players, but must also involve local MSMEs.
“This policy also prohibits the export of raw mining products; they must be processed domestically to increase added value and create jobs,” he said.
The third policy is improving MSMEs’ access to financing as the current share of banking credit for MSMEs is only 21-percent, which is far lower when compared to Thailand and Malaysia, where it is already above 40-percent, say Antara News.
The fourth policy pertains to digital transformation, which regulates four aspects: platforms for businesses, the flow of imports of consumer goods, the trading system, and the competitiveness of domestic MSME products.
Antara News report that Masduki suggested Indonesia learn from China’s strategy in implementing digital transformation policies. China has been able to strengthen its digital economy platforms and prevent foreign platforms from dominating its market.
However, the government policies to protect MSMEs and domestic products from the influx of cheaper products are often seen as anti-innovation and anti-technology, he noted.
“In many countries, technology has been regulated, one of which is related to the transparency of algorithms and data on the platforms,” he added.
Source: Antara News
Stock photo by Aditya Wardhana on Unsplash
