The Government’s Response to the Influx of Imports: Protecting SMEs Amidst Challenges for Businesses

The Indonesian government has taken serious steps to protect micro, small, and medium enterprises (MSMEs) by tightening regulations on the influx of imported goods into the domestic market. This decision comes as a response to increasing complaints from associations and the public regarding the inundation of imported products in traditional markets, resulting in the decline of local businesses and the rise of non-domestic sales on e-commerce platforms.

President Joko Widodo chaired a closed-door meeting on Friday, October 6, 2023, during which concrete measures were announced. Import restrictions will apply to key commodities, including children’s toys, cosmetics, textiles, traditional medicines or health supplements, ready-made garments, clothing accessories, bags, electronic products, and footwear. Harmonized System (HS) codes for these commodities will be modified to enforce import restrictions.

The Minister of Economic Affairs, Airlangga Hartarto, stated that these measures are essential to safeguarding the domestic production market. However, this policy shift does not come without challenges. An economist from the Center for Economic Reform (CORE), Yusuf Rendy Manilet, stated that while protecting MSMEs is a commendable move, it presents a double-edged sword. On one side, it protects MSMEs; on the other, it affects businesses that rely on imports as raw materials. Domestic production processes, especially in sectors heavily dependent on imported raw materials, might come to a halt or seek more expensive alternatives.

However, it is crucial to note that this policy aims to protect MSMEs and reduce the importation of consumer goods. The Indonesian Employers’ Association (Apindo) acknowledges the complexity of this policy and urges the government to consider its impact carefully. They desire policies that protect MSMEs without disadvantaging entrepreneurs.

Addressing these concerns, the government clarified that they are currently formulating a positive list for permissible imported goods entering Indonesia. This list is being compiled considering items that cannot be produced domestically and are not products of MSMEs. Although the details have not been released, the government hopes to finalize this positive import list soon.

When facing these complex challenges, it is essential for the government to maintain communication with business stakeholders and consider all aspects before implementing further policies. Striking a balance between protecting MSMEs, strengthening domestic production, and supporting entrepreneurs is key to ensuring sustainable and equitable economic growth for all parties involved.