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refer to an article titled '€œImport tax hike applauded'€, (The Jakarta Post, July 24, p1).

This is very typical of a government that has run out of ideas. This tax hike is only one side of the equation. Yes it provides domestic industries with breathing space, but consumers will have to bear the brunt of the price hike.

If all you are doing is increasing prices, but not competitiveness, in the long run consumers will have to pay higher prices, and this leads to inflation.

And the government'€™s approach is too simplistic: just because prices of imported goods are higher, it does not mean that consumers will automatically switch to domestic products.

They may also hold back on spending, which will further weaken growth. Yet, they have not said how they would maintain the confidence of the consumer class.

We could have offered subsidies or tax relief for domestic producers. But if you wonder why the government chooses to go down the taxation route, it'€™s because the government has no money. President Joko '€œJokowi'€ Widodo promised us the moon and delivered teacups. Tax receipt to date is only 40 percent of what is planned, thanks to his unrealistic budget.

The government could also increase domestic competitiveness and build the capacity of domestic producers. Push down the costs of doing business! In the short term, streamline the permit system, simplify contract enforcement, stop changing laws and regulations every two weeks and enforce existing regulations.

In the medium term: build roads, ports and railways '€” logistics make up 35 percent of retail prices! Educate and train our workforce!  

Obviously, the government has never heard of creative destruction. Maybe it'€™s time we let the more uncompetitive domestic producers die out.

Ngukzilla
Jakarta