AmCham Update Vol. 5 #42

Import Regulations Revision, Sri Mulyani Predicts 5.17% Q1 Economic Growth, Calls to Raise Debt-to-GDP Ratio, Indonesia and Vietnam Target $18B in Bilateral Trade

Apr 29, 2024

Gov't to Finalize Revision of Import Restriction Regulation

The government is finalizing revising import regulations, which are expected to be ready by the end of this month (April), Director General of Foreign Trade at the Ministry of Industry Budi Santoso said.

The revision will address import rules for Indonesian migrant workers’ and passengers’ goods, as well as import restrictions and limitations for certain goods. It is also expected to ease the burden on domestic industry and ensure timely access to raw and other materials. However, details of HS codes for industrial products to be revised remain unclear.

The government should accurately assesses domestic needs and communicate clear directives in formulating the import restriction revisions, Institute for Development of Economics and Finance (INDEF) Economist Andry Satrio Nugroho said. He emphasized the importance of cross-ministerial coordination to avoid conflicting policies.

AmCham Indonesia, along with other foreign business chambers, urged immediate solutions to import issues during a meeting with Coordinating Minister of Maritime Affairs and Investment Luhut Pandjaitan in mid-April. Foreign investors have warned of potential industry disruptions, prompting calls for reassessment.

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Sri Mulyani Predicts 5.17% Economic Growth in Q1

Minister of Finance Sri Mulyani Indrawati has projected Indonesia’s economic growth in Q1 2024 will reach 5.17 percent, close to the full-year projection of 5.2 percent, driven by robust household consumption and indicative of the continuing post Covid-19 economic growth momentum.

The prediction is supported by strong consumer performance, foreign direct investment (FDI) and Indonesia’s manufacturing Purchasing Managers’ Index (PMI) at 54.2 as of March, said Sri Mulyani.

Consumer confidence also remains stable at 123.8, and the Mandiri Spending Index is strong at 46.9, due to influence from Ramadan and Eid al-Fitr. Despite electricity consumption for businesses growing by 7.5 percent, there have been industry contractions due to the public holidays prior to Eid al-Fitr.

However, Sri Mulyani remains cautious, noting the geopolitical tensions in the Middle East which have caused oil prices to surge to $90 per barrel and disruptions in the global supply chain. She emphasized the need for an active response to the dynamic global economy.

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Bappenas Proposes Raising Debt-to-GDP Ratio

The Ministry of National Development/National Development Planning Agency (PPN/Bappenas) has proposed increasing the country’s debt to approximately 40 percent of gross domestic product (GDP), in line with the Government Working Plan 2025 (RKP), allowing for the implementation of new programs by the upcoming administration of President-elect Prabowo Subianto.

However, Ministry of Finance Fiscal Policy Agency (BKF) Head Febrio Kacaribu said the ratio was still under discussion and no final decision had been made yet.

President Joko Widodo set a target deficit of 2.45 to 2.8 percent of GDP for the State Budget (APBN) of the next government, a wider range than the 2024 budget deficit. This target is disproportionately large compared to the 2023 deficit of 1.66 percent. Despite this, the policy aims to bolster productivity by providing significant fiscal leeway to spur economic growth.

The government plans to issue State Securities (SBN) and loans with favorable terms to finance its expenditure next year, primarily for infrastructure projects, while exploring sustainable financing avenues such as partnerships and blended finance.

Expanding the debt-to-GDP ratio is counterproductive and could negatively impact Indonesia’s government credit rating, causing concern for foreign investors, said Centre of Economic and Law Studies (CELIOS) Executive Director Bhima Yudhistira Adhinegara.

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Indonesia and Vietnam Target $18B in Bilateral Trade

Indonesia and Vietnam agreed to increase bilateral trade to $18 billion or more by 2028, during the 5th Joint Commission on Bilateral Cooperation between Indonesian Minister of Foreign Affairs Retno Marsudi and Vietnamese Foreign Minister Thanh Son, in Hanoi, Vietnam, on April 24.

This target surpasses their previous goal of $15 billion for the same year by reducing trade barriers; concluding agreements on defense and security, energy, health, tourism and optimization of the Joint Committee on Economic, Scientific and Technical Cooperation (JC-ESTC); as well as ensuring a conducive two-way investment climate.

Elevating the two states’ partnership to a Comprehensive Strategic Partnership, both foreign ministers underscored the necessity for enhanced dialogue amid rising regional tensions, and emphasized the importance of defense cooperation, with Indonesia keen to exhibit its defense industry offerings at an upcoming expo.

Marsudi noted the high interest in two-way investment between the two countries in the high-tech, green economy and electric vehicle industries, and urged Vietnam to protect Indonesian investors there.

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Digital Economy Forum III: Policy Planning For A Digital Future In Asia

The development of the ASEAN digital policy landscape was the center of the discussions at the third edition of the Digital Economy Forum III, held in Bangkok, Thailand on April 24-25. Under the theme Policy Planning For A Digital Future In Asia, the forum was hosted by USAID, the international development company DAI, and Mango Tango Asia, bringing together foreign chamber representatives from across Southeast Asia.

The first day encompassed topics including the latest developments in the Digital Economy Framework Agreement (DEFA), ASEAN digital transformation, the tech talent landscape, and personal data protection policies in Thailand, along with the latest advancements in e-commerce and artificial intelligence (AI).

Day two delved deeper into generative AI and cybersecurity, e-government developments including the national digital business agenda (NDBA) in the Philippines, and digital public infrastructure.

Attending business chamber representatives participated in multiple panel discussions, sharing success stories, experiences, challenges, and also exchanged views on digital policy advocacy in their respective countries.

AmCham Indonesia Director of Government Relations Dyah Kusumaningtyas spoke on Indonesia’s digital landscape, highlighting Covid-19's role as a catalyst for structural reform in the country's digital regulatory landscape. This resulted in the government realizing the massive adoption of online platforms during that time when everything shifted online.

Dyah also emphasized the importance of further leveraging the utilization of the digital landscape by enhancing digital skills, bolstering digital literacy and addressing infrastructure gaps to maximize potential economic benefits.

Get to Know Our Members: Coca-Cola Distribution Indonesia

Coca-Cola Europacific Partners Indonesia (Coca-Cola Distribution Indonesia and Coca-Cola Bottling Indonesia) is part of Coca-Cola Europacific Partners Group, one of the world's leading consumer goods companies. CCEP Indonesia manufactures and distributes ready-to-drink non-alcoholic beverages products under license from The Cola-Cola Company. CCEP Indonesia operates eight beverage manufacturing facilities and two preform manufacturing facilities, and has more than 380 distribution points to serve over 450,000 customers across the country.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Lydia Ruddy and written by the AmCham Staff. Paul L Goddard is the Managing Editor.

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