Editorial: Carrots, Not Sticks, Will Spur Competition

By webadmin on 10:25 am May 09, 2012
Category Archive

Supporting local manufacturers facing competition from cheap imported goods is a sound reason for introducing new regulations. Although markets should be kept open and free if possible, it is the government’s duty to help local companies. Governments around the world do this with protective trade barriers or through subsidies.

It is thus entirely rational for the Ministry of Trade to introduce new regulations that dictate which goods can be imported and who can import them. The aim is to ensure that cheap goods do not flood the domestic market and hurt local manufacturers. Previously, companies with general import licenses could bring in almost any goods they wished.

The regulations, however, have also created uncertainty and concern among manufacturers, especially foreign investors who have established plants in Indonesia. Their worry is that items such as certain pharmaceutical products are not easily available here. Their concerns have merit, too, and the government should listen to them.

Furthermore, there is the danger that the new regulations will further complicate an already complex system and add another level of bureaucracy for businesses already struggling to deal with a multitude of laws and regulations.

The best way to support local manufacturers and keep markets free and open is to provide incentives which help companies reduce cost and raise their competitiveness. This can be achieved by reducing the paperwork required to apply for import licenses or other permits. It can be achieved by investing in better infrastructure and upgrading the education system so transportation costs come down and companies have access to more skilled labor.

The ultimate goal must be to improve the country’s overall competitiveness, and this cannot be done by regulations alone. Manufacturers must also invest in better equipment and processes so as to offer their customers higher-quality goods.