Government prepares stimulus to boost exports

JAKARTA. In a bid to significantly boost export volume amid the bleak outlook due to a steady decline in overseas demand, the government is preparing another economic stimulus package, says Finance Minister Chatib Basri.

Chatib said on Wednesday during a press conference after an export forum at the Industry Ministry that the government might issue a set of new regulations that would include tax incentives, to help local industry players be more competitive and increase the value of their exports.

“We have listed measures [...] that’s what the government can do quickly,” he said.

Chatib said the set of incentives would likely be in the form of ministerial regulations, or other rules under the authority of the president.

Indonesia has struggled with declining exports, which from January to July this year totaled US$106.18 billion, down 6.07 percent from last year.

Meanwhile, imports declined slightly by 0.86 percent to US$111.83 billion, resulting in a deficit of $5.65 billion for the period. The figure has exceeded the $5 billion level that the government anticipated for this year.

The wide trade gap has pushed down the country’s current account, with the second quarter deficit hitting an all time high of $9.8 billion, equal to 4.4 percent of its gross domestic product (GDP).

A continuing current account deficit would undermine the sustainability of the foreign exchange reserves, while in the short term, it would erode the rupiah exchange rate, eventually driving higher inflation as well as surging lending rates and import costs.

The planned stimulus package will follow an earlier set of measures, including tax breaks and relaxation of investment licenses, that was announced at the end of last month to spur economic growth amid investment deceleration and to stabilize the weakening rupiah.

Another measure that would help exporters would be easing the flow of goods in seaports by being less scrutinizing, Industry Minister MS Hidayat said.

“The options [that the government is discussing] will be issued in the next three to six months as an ad-hoc solution to address the current challenges faced by our exporters,” he said.

In addition, Trade Minister Gita Wirjawan said one of the options being put on the table for discussion would be to simplify tax procedures.

“We are thinking about whether or not exporters should be required to restitute their taxes. The Trade Ministry has agreed with this option as long as it aims to boost exports and is approved by the Finance Ministry,” he said.

At present, producers in bonded zones who outsource some of their jobs to subcontractors outside the special zones are required to pay a 10 percent value-added tax to the government, and later can restitute the taxes within one year.

However, as restitution procedures are long and complicated, the Indonesian Employers Association has proposed for its the elimination.

Meanwhile, Indonesian Textile Association (API) chairman Ade Sudrajat said that the elimination of the tax restitution would considerably help the cash flow of exporting firms as they could use the paid taxes for other business costs.

“We can increase exports by around $2 billion within two years when the system is removed,” he said. (Linda Yulisman)