Interview: Rosan Roeslani

How must small and medium-sized enterprises (SMEs) be reinforced to improve e-marketplaces and reduce the reliance on online imports?

ROSAN ROESLANI: Currently, only 6-7% of SMEs sell products on e-commerce sites, which is due to a variety of challenges. A lack of internet access in remote areas, low product quality, high logistics costs and the lack of marketing skills are hindering local businesses from using online platforms. Thus, online marketplace firms and the government need to engage with SMEs to increase local product presence in e-commerce.

Wide-scale training can help SMEs become familiar with digital marketing, improve their product quality, and keep track of the latest consumer trends. Aggregators can also collect products from SMEs, maintain high-quality products, educate sellers and provide lower logistics costs to increase the competitiveness of SME production. The government should also provide incentives to online marketplace firms to absorb more local products rather than imported products.

What are the main measures needed to improve import and export licensing processes?

ROESLANI: Several improvements have accelerated and increased the transparency of export and import licensing processes. The government has launched a series of deregulation and de-bureaucratisation policies, along with 16 economic packages. The government has also adopted the Indonesia National Single Window. Furthermore, the World Bank’s “Ease of Doing Business” report for 2018 indicated that the time required for documentary compliances for trade, fell from 132.9 to 119.2 hours. However, the government is facing difficulties in preventing extortion occurring between factories and harbour gates. Therefore, the government should establish better control over pre- and post-clearances, and should also improve the digitalisation and automation of import and export procedures, to eliminate unofficial costs and improve the entire process.

To what extent are manufacturing facilities receiving the necessary support in order to make local industry globally competitive?

ROESLANI: Indonesian manufacturers require more support from the government through tax incentives so they can invest in more efficient, fast and technologically advanced machines that are representative of the Industry 4.0 revolution.

Some industries, such as textiles and garments, are facing losses primarily due to old and unproductive machinery. In response, through the third economic package launched in October 2015, the government promised to provide more affordable gas prices for the manufacturing industry. However, the implementation of this plan needs to be sped up so that the industrial sector does not lose competitiveness due to rising production and energy costs.

How will future trade deals serve as a growth driver for the industrial sector?

ROESLANI: In 2018 Indonesia commenced comprehensive economic partnerships with the EU and Australia. Indonesia also continually drives extensive regional economic partnerships with ASEAN, China, India and Japan, and also processes trade agreements with non-traditional countries such as Bangladesh, South Africa, Morocco, Kenya and Mozambique.

As these new trade deals are set to eliminate tariffs and non-tariff barriers, Indonesia’s industrial base will as a result have broader market access, lower imported raw materials, and become more competitive on an international level. These trade deals will support the growth of commodity-based industries. Other industries, such as textiles, vehicles, footwear, machinery and electronics, will also be positively impacted by these trade agreements. Even when US protectionism increased recently, Indonesian exports did not see a decline. In fact, with these deals in place, Indonesian exports have the ability to grow by up to 5-7% in 2019.