Indonesia’s Industrial Sector at Risk Due to Import Policy: Industry Ministry Urges Policy Synergy

Jakarta, INTI - In October 2024, Indonesia's Manufacturing Purchasing Manager's Index (PMI) was reported at 49.2, marking four months of continued contraction, according to S&P Global. The index reflects a downturn in both output and new orders, indicating the challenges facing the manufacturing sector. The stagnation in the manufacturing PMI is largely attributed to the effects of Trade Ministerial Regulation No. 8/2024, which allows an influx of imported goods into the domestic market.

Febri Hendri Antoni Arif, spokesperson for the Ministry of Industry, highlighted that without substantial policy revisions to protect the manufacturing sector, such as amendments to the current import regulation, the sector will likely continue struggling.

"PMI data for October 2024 from S&P Global serves as concrete evidence of the negative impact caused by Trade Ministerial Regulation No. 8/2024," Febri remarked in Jakarta on Friday, November 1.

The regulation has eased restrictions on the import of ready-made goods by eliminating the need for Technical Approvals (Pertek) from the Ministry of Industry for apparel imports. Of the 518 Harmonized System (HS) codes covered by the relaxed import regulations, approximately 88.42%, or 458 commodities, pertain to finished goods that could be supplied by domestic industries. As a result, Indonesia’s market has seen a significant influx of imported goods.

“We question the Trade Minister's claim that Regulation No. 8/2024 is meant to protect local industries, especially the textile industry. In practice, the opposite is true. This policy allows ready-made goods, particularly apparel, to be imported freely into the Indonesian market without requiring approval. This situation is detrimental to domestic producers," Febri stated.

The Ministry of Industry stresses that it cannot singlehandedly safeguard the local manufacturing sector without support from other ministries and agencies. Febri emphasized that the Ministry of Industry has fully exercised its duties to promote industry growth, in line with President Prabowo Subianto’s target of 7-8% economic growth. However, cross-ministerial cooperation is needed to adopt policies that genuinely support domestic industries.

"We appeal to other ministries and agencies to put aside sectoral priorities for the greater goal of strengthening our manufacturing industry. The Ministry of Industry has been proactive in fostering industrial growth to meet the economic growth target of 7-8%. Thus, we hope that ministries with policies affecting the manufacturing sector will work in synergy with us by implementing measures that positively impact the sector," Febri urged.

One of the immediate policies sought by the Ministry of Industry and the sector at large is the implementation of Safeguard Measures (BMTP) on imported ready-made apparel. This proposal, which was discussed in Bandung, aims to protect the local industry but continues to face resistance from other government bodies.

"The industrial sector needs urgent protection, particularly for downstream and finished goods. Concrete action is essential to ensure that the manufacturing industry remains viable," Febri concluded.