The recent depreciation of the Indonesian Rupiah against the US Dollar has raised alarms about the escalating expenses associated with importing raw materials and logistics in the country. Furthermore, this economic turbulence has also triggered a surge in bank loan interest rates for the nation’s manufacturing sector.
This development has necessitated a thorough review of production costs within the manufacturing industry. While some businesses have chosen to trim their profit margins to accommodate the mounting production expenses, smaller-scale manufacturing enterprises have found themselves compelled to adjust their product pricing to cope with the increasing costs of raw materials and production.
Indonesian Minister of Industry, Agus Gumiwang Kartasasmita, addressed these concerns during a press briefing held in Jakarta on October 27, 2023. He voiced his hope for effective inflation management within Indonesia and emphasized the critical role of maintaining stability in variables such as industrial gas prices and electricity tariffs to ensure production costs remain steady and to uphold the competitiveness of domestically manufactured goods.
Minister Agus expressed confidence in the central bank’s ability to maintain economic stability and underscored the instrumental role of the banking sector in providing support to the industrial domain, which is a significant contributor to tax revenues and the broader national economy. “We maintain a positive outlook on the prospects for continued growth within the manufacturing sector,” he affirmed.
To bolster the productivity and competitiveness of domestic industries amid the current economic climate, the primary strategy involves an increased reliance on domestic products. Concurrently, bolstering the presence of domestic products in the local marketplace and curbing imports are pivotal steps to mitigate the impact of Rupiah exchange rate fluctuations.
The Ministry of Industry is proactively urging government departments, institutions, regional governments, and state-owned enterprises to fulfill their budgetary commitments for the year 2023, with a total target of IDR 1,157.47 trillion. As of October 23, 2023, the national budget has already realized an average of 66.78%.
In a bid to reinforce these initiatives, the Ministry of Industry is embarking on a series of innovative measures, including the digitization of the Domestic Component Level (TKDN) certification process. This transformative step aims to facilitate the broad and efficient utilization of domestic products across various segments of society.
The subsequent phase involves the introduction of restrictions and bans on specific categories of imports, designed to level the playing field for domestically manufactured goods. This move comes in response to the challenges posed by the strengthening US Dollar against the Rupiah, which has substantially impacted business importers.
Importers, grappling with the escalating costs of goods in source countries and increased domestic logistics expenses, have been constrained to curtail import volumes and, in many cases, raise product prices. These adjustments have become a necessity amid unfavorable economic conditions and diminishing purchasing power among the Indonesian populace.