T

he government is planning to offer a set of incentives in order to encourage better export growth as it looks to narrow the deficit in Indonesia’s trade balance, a move expected to help strengthen the rupiah.

Among the incentives being mulled over by the government is a subsidy in the timber legality assurance system (SVLK) and a relaxation in export regulations for sample furniture, said Industry Minister Airlangga Hartarto after a meeting at the Office of the Coordinating Economic Minister.

“For small and medium-sized industries, [the government] will give incentives in the form of subsidizing the cost of the SVLK,” said Airlangga in Jakarta on Friday, adding that the move was expected to increase the export output of the logging and forestry industry.

The exports of the logging and forestry industry grew 5.41 percent year-on-year (yoy) during the first quarter of 2018, data from the Central Statistics Agency (BPS) reveal. Growth in the first quarter was higher than the 4.62 percent growth recorded over the same period last year, the data show.

Airlangga said the government was also thinking about lowering the rate of dues submitted by palm oil companies to the Indonesian Oil Palm Estate Fund (BPDP) for cooking oil exports.

At the same time, the government was exploring the possibility of incentivizing industries that had relocated operations in search of lower labor wages, said Coordinating Economic Minister Darmin Nasution.

“If they [relocate], they would also move machinery. The industry minister [Airlangga Hartarto] suggested that the government help revitalize the machines to be more productive. We are currently evaluating the right incentives [to offer],” said Darmin on Monday.

He hinted that the proposed incentives might be related to taxes, but declined to give further details on the matter.

Darmin previously said the government was seeking to reduce the trade balance deficit by maximizing export output as part of its efforts to support Bank Indonesia’s move to stabilize the rupiah, which has been suffering against a stronger United States dollar.

Indonesia recorded a US$2.83 billion deficit in its trade balance between January and May this year, according to BPS data, as exports grew 9.65 percent over the same period, while imports surged 24.75 percent.

The figure is in contrast to the corresponding period in 2017, during which Indonesia recorded a $5.99 billion surplus.

Bank Central Asia (BCA) chief economist David Sumual suggested that the government provide a comprehensive framework to boost export output, considering that the task required long-term planning.

“Boosting exports cannot be instant and [implemented with] ad hoc incentives. There should be integral planning and a roadmap involving different sectors. It would be in vain if [the government] gave many incentives when the sectors lacked competitiveness in the market,” said David on Friday.

David suggested that the government focus its efforts on boosting output from value-added and export-oriented natural resources industries.

While appreciating the government’s responsiveness in facing challenges to the economy, Shinta Widjaja Kamdani, deputy chairman of international relations at the Indonesian Chamber of Commerce and Industry (KADIN), said currently Indonesia needed quick and practical solutions.

“Currently, we do not have the privilege to build [export-oriented industries] as challenges are right ahead. We need a practical and quick solution,” she said, adding that the government should focus on developing tourism and commodity-based industries.

Shinta said the strengthening of the US dollar would provide added benefits for foreign tourists who visited Indonesia. Based on that, she suggested that the government accelerate the development of supporting infrastructure in tourist areas and increase the number of flights to main tourist destinations.

Shinta also suggested the government smoothen the distribution line for commodity-based industries, such as coal, coffee, cocoa and palm oil, among other industries, by setting up special terminals in several seaports to specifically handle commodity exports.