JAKARTA: Indonesian government has finally decided to increase the import duties on all textile finished goods under the most favored nation rule, the World Trade Organization (WTO) allows its members to apply import duties of up to 40 percent. The policy will cover 741 items out of 1000.
The step will support their goal to reach an ideal tariff system where [imported] finished products are charged with higher duties compared to raw materials or intermediate goods.
The system will provide the appropriate treatment for the upstream as well as the downstream industries, providing both sufficient room to grow.
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.
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. .
The planned tariff increase would be within the range permitted by the global trade governing body.
Indonesian Institute of Sciences (LIPI) economist Latif Adam is of the view 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. In fact, Indonesia still sees inefficiency as the country is still struggling with labor productivity and the use of technology in manufacturing.
This should have been done much earlier. But still it is a good move because in terms of tariffs they are more liberal compared to other developing nations. However, countries that do not have free trade agreements with Indonesia ought to be subjected to higher tariffs.