Jakarta,
Aug 27 (Antara) - Indonesia is taking steps to reduce its fuels imports
and promote the use of biofuels at home in response to its current
account deficit and the depreciation of its rupaih currency against the
US dollar.
Besides
cutting oil and gas imports, the Indonesian government, through a
package of economic policies it announced last weekend, is also boosting
its exports to help cover its deficit.
"Right
now, we need an immediate solution to the current account deficit. The
government will overcome the deficit by reducing imports, particularly
fuel oils," Chief Economic Minister Hatta Rajasa told a press conference
on Monday.
Seasonal external and internal factors as well as falling prices of
export commodities overseas have been believed to contribute to widening
of the current account deficit from US$5.8 billion or 2.6 percent of
the country's GDP in the first quarter this year to US$9.8 billion in
the second quarter or 4.4 percent of the GDP.
Observers have also predicted that unless preventive measures are
taken, the rupiah exchange value could reach Rp12,000 per US dollar.
Until Friday morning, for example, the exchange rate had stood at 11,035
rupiah for one US dollar, meaning that the value of the rupiah had
decreased by 175 points.
Economic observer Sri Adiningsih of the Gajah Mada University has even
predicted that Indonesia's rupiah currency would continue to weaken and
has the potential to be devalued to Rp12,000 per US dollar.
"I predict the rupiah will continue to weaken. It could fall to
Rp12,000 per US dollar if we are not careful," Sri Adiningsih said.
Therefore, the government on Friday announced its economic policy
packages which outlined four steps to be taken in response to the
country's latest economic conditions.
Hatta said that the government will boost exports by reducing taxes for
companies that export 30 percent of their products abroad, reduce oil
and gas imports by boosting the usage of biodiesel, increase taxes for
luxury goods from 75 percent to 125-150 percent while increasing the
production of minerals.
Apart
from maintaining the value of the rupiah against the US dollar, the
government also plans to maintain fiscal deficit value at 2.38 percent
and maintain people's purchasing power and inflation rate.
"The
current deficit is mostly contributed to by oil imports. Overall, we
still record a surplus in oil and gas trade," Hatta said.
Indonesia
currently imports an estimated 35 million kiloliters of diesel oil per
year, including 17.5 million kiloliters for subsidized diesel oil, he
said.
To reduce diesel oil consumption, the government would make it
mandatory for the public to use crude palm oil-based bio-fuel, he said.
"Our CPO production is currently on the rise, while on the other hand,
the CPO price in the market is declining. Therefore, we must protect our
palm oil entrepreneurs and farmers to continuously get their product to
market," he said.
"The price of CPO-based biofuel is lower than that of imported diesel oil," he noted.
Hatta Rajasa predicts the increasing use of biodiesel will reduce oil imports.
"We will reduce the burden on oil and gas imports, expand the domestic
market and strengthen public forestry efforts that can improve the use
of biofuels," he said after a coordinating meeting with the Indonesian
Biofuel Producers Association.
The installed capacity of the business world in the country today is
5.67 million kiloliters, and there will be an additional amount of about
three million kiloliters, along with 3.14 million kiloliters, as called
for in future plans.
The association members said they are ready to meet the mandatory
requirements of 10 percent biodiesel use from the Public Service
Obligation (PSO) and non-PSO diesel use, which is currently the overall
percentage of diesel fuel being consumed per year, in a bid to reach 35
million kiloliters.
"The business world is ready to supply biodiesel, and this mandatory
order is not only being applied to PSO, but also non-PSOs that provide
biodiesel for large mining industries and other industries that use
diesel fuel," he said.
Earlier, the Indonesian Chamber of Commerce and Industry (Kadin) has
urged the government to overcome the country's high trade deficit so
that it will not affect the national economy.
"The problem must be resolved soon before it has a far-reaching effect
on the national economy," Kadin deputy chairman for banking and
financial affairs, Rosan P. Roeslani said.
Indonesia recorded a trade deficit of US$3.3 billion in the first
quarter of 2013. The figure is expected to increase to US$6 billion at
the end of this year. The deficit was triggered by high import of oil
and auxiliary materials and low export of national commodities.
To
curb the deficit, he said the government must be able to control the
high import of oil and auxiliary materials while at the same time
raising the export of national commodities.
In order to boost exports the government imposed a tax cut incentive
for labor-intensive industries. The tax cut incentive will be given to
companies that export 30 percent of their products abroad.
The tax cut incentive is expected to boost exports.
However, economist Enny Sri Hartati of the Institute for Development
of Economics and Finance (Indef) said the tax incentive given by the
government to labor-intensive industries is not the right solution to
the industry's problems.
"The tax cut incentive offered by the government to labor-intensive
industries will not accomplish its objective. It is not the right
solution," she said.
She added that what was needed by industries was access to financing
sources, lower interest rates and other forms of incentives, rather than
a tax cut.
Chairman of the Indonesian Employers Association (Apindo) Anton Supit
said the government's tax cut incentive had no relevance to the problems
faced by labor-intensive companies.
"The problem is that our products no longer compete because our labor
costs have reached about 30 percent of the selling price," Anton said.
The industries needed a clear regulation on labor affairs to overcome the problem, not a tax cut incentive.
He noted that Apindo's products could serve as an example, such as
footware and garments. These industries have total exports of US$20
billion and employ about four million workers.
"What is needed now is a way to reduce labor costs without sacrificing
workers. This is more important. So, we should not be offered a solution
with a tax cut, because if we suffer from losses, we, in reality, do
not pay taxes," he said.
"Of course we thank the government for the tax cut measure, but if it
is said that this policy offers an answer to the problems, I think it is
not true," Anton said.
In the meantime, a legislator said the government's package of economic
policies should have been adopted long ago to prevent unfavorable
economic conditions.
"The steps as formulated in the economic policy package should have
been taken during the first year of the president's first term in 2009,"
Harry Ashar Azis, the deputy chairman of the House of Representatives
(DPR)'s Commission XI on financial affairs, said.
But
Hatta believed the recently announced package of economic policies, if
implemented properly, would reduce the current account deficit to below
three percent in the third quarter of this year.
"We believe the current account deficit which is now 4.4 percent of the
gross domestic product (GDP), will drop below three percent in the
third quarter," Hatta said. ***3***
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