W

ith the implementation of the newly approved Industrial Law, Indonesia will have a strong legal base to promote import substitution as well as downstream industries in efforts to reduce the manufacturing sector'€™s heavy reliance on imports of components and machinery, a senior minister has said.

Industry Minister MS Hidayat said in Jakarta on Thursday that with the new Industrial Law, the manufacturing sector was expected to grow by up to 6.8 percent and create 400,000 new jobs in 2014.

The sector is expected to generate US$125 billion from exports. In addition it could also attract $14 billion in foreign investment and Rp 50 trillion in domestic investment.

'€This requires our maximum effort,'€ Hidayat said in his address at the opening of the ministry'€™s
national conference.

He disclosed that President Susilo Bambang Yudhoyono last month signed into law the industrial bill, replacing a 1984 law, which sought to improve the competitive edge of the national manufacturing sector, and one that relied less on imported components and machinery.

Indonesia recorded a heavy trade deficit in 2013 partly because of the rising cost of imports to feed its manufacturing sector.

Indonesia saw its gross domestic product (GDP) growth slow to 5.78 percent in 2013 from an average of 6 percent between 2010-2012, according to figures released by the Central Statistics Agency (BPS) on Wednesday.

Hidayat said some of the measures that were being planned included offering tax holidays and tax allowances, ensuring adequate supplies of energy and power, more incentives for the development of new energy resources, termination of exemption of imported duties for raw materials and components.

Other measures would also include the government'€™s equity participation in building smelters for basic metals including iron ore, alumina, bauxite and copper, tighter controls on imports of industrial products, including strengthening law enforcement to counter smuggling, setting a domestic market obligation for natural gas to ensure sufficient domestic supplies, applying export duties on selected agricultural products like palm oil and cacao to ensure domestic supply and support for the development of industrial zones.

Moreover, Hidayat also said that focusing on downstream manufacturers and import-substitution industries was crucial in preparing local industries for the ASEAN Economic Community (AEC) that comes into effect in December 2015, as a result of which there will be free flow of goods, services, capital and investments among its members.

'€œThe AEC could be a golden opportunity to for our local industries to reach a wider market,'€ Hidayat said in a statement.

Hidayat, however, warned that if local markets were not sufficiently prepared, the free market could be a challenge for them as Indonesia was going to be a main destination market for ASEAN'€™s commodities due to its myriad of people. (alz)