Government sets Rp 90 trillion to promote local products

The Jakarta Post, JAKARTA | Fri, 02/27/2009 8:49 AM  

Businesses may see Rp 90 trillion (US$7.5 billion) in extra demand for domestic products this year, as the government intensifies efforts to bolster the local market amid rapidly declining global demand. 

The amount will come from state budget allocations for state ministries and institutions, Fauzi Aziz, the Industry Ministry's director general for small and medium industries, said Thursday.

After the issuance of a presidential instruction favoring local products, a set of implementing regulations will soon be introduced mandating state institutions and ministries to use locally made products to boost the domestic market, already being buoyed by recent import restrictions.

"The 2009 state budget for ministry and institutional spending is around Rp 300 trillion," Fauzi said.

"We're trying to ensure that around 30 percent of that is allocated to domestic product spending."

Under the planned regulation, every government institution must spend on domestically produced goods for operational procurements, such as uniforms and shoes.

Currently, there are around 2.5 million civil servants.

Against the backdrop of slowing overseas demand as the world tips into recession, the government has turned to the domestic market to sustain economic growth.

Since early this year, entry for imports of products such as shoes, textiles, electronics and food and beverages has been limited to certain designated ports to help protect local producers.

Associations representing the textile, shoe and electronics industries have confirmed that orders are now on the rise following the import restrictions, with shoe producers predicting full-year orders to increase by Rp 5 trillion.

Normally, annual sales of shoes reach Rp 25 trillion, including about Rp 10 trillion for locally made ones. 

The impact may be even greater once the planned government regulation on the use of local products comes into effect.

Industry Minister Fahmi Idris, appointed to lead the national team on Domestic Goods Usage Intensification (P3DN), has begun inviting officials from the relevant ministries and institutions to help formulate standards.

Fahmi has so far invited the state minister for administrative reform, the education minister, the National Police chief and the Indonesian Military (TNI) chief.

"We will hold more meetings with other institutions in the coming weeks to hear their input," Fahmi said after the meeting. 

The House of Representatives has approved a six-billion-dollar stimulus package to protect the country from the worst impacts of the global economic crisis, lawmakers said Wednesday.

The parliamentary budget committee has approved the plan worth Rp 73.3 trillion (US$6.15 billion).

“We approved the stimulus in accordance with the government’s efforts to overcome the effects of the global slump,” committee deputy chairman Suharso Monoarfa said.

“We hope that the stimulus can prevent rising unemployment, sustain consumer spending capability and strengthen businesses.”

The stimulus consists of Rp 56.3 trillion of tax incentives and Rp 17 trillion in additional government spending and subsidies. (hdt)