Posted on 24 Feb 2015
After imposing safeguard duties on imported construction steel early this month, the government plans to form a task force to draft and evaluate policies to further provide protection for a flailing industry.
According to Industry Minister Saleh Husin, the government will hold further discussions on strategies for empowering the domestic steel industry this week.
One item up for discussion, Saleh said, was the likely imposition of a 15 percent import tariff on construction steel, which is hoped to help curb the sharp rise in shipments into the local market.
"We will form a team to formulate some policy strategies, including a 15 percent import tariff. An evaluation into this is necessary to allow the domestic market to flourish," the minister told reporters on the sidelines of a meeting at the Office of the Coordinating Economic Minister in Jakarta on Friday.
"Our steel industry is currently somewhat ailing, so we must act firmly in order to keep it competitive."
According to data from the Investment Coordinating Board (BPKM), the steel industry is still highly dependent on raw material imports such as sponge iron, pig iron and pellets, all of which are almost entirely sourced from overseas.
This has resulted in a negative contribution of US$8.9 billion to the trade balance in 2013, making the steel industry one of the main culprits in the country's current account deficit.
Meanwhile, the ministry's director general for manufacturing industries, Harjanto, said the proposed import tariff was geared toward safeguarding the steel industry, with the expectation that such measures would ensure the development of both upstream and downstream sectors in the country.
"We want to safeguard the domestic industry, but also keep within the corridors of the World Trade Organization [WTO]. Even other countries have higher safeguard duties," he told The Jakarta Post on Friday.
Despite such measures, Harjanto warned businesses not to take it as a mandate to profiteer through price hikes.
"We need to introduce policies that not only protect the upstream cycle, but also the downstream industries. Safeguarding measures like this shouldn't be taken for granted as an opportunity to raise prices, as that would obstruct other national projects," he said.
Harjanto said the government expected the tariff to boost the utilization of local steel production and processing industries. "We have our maritime axis plan and other projects in the pipeline. What we plan to achieve [with the tariff] is for imports to remain competitive with the domestic industry," he explained.
The president director of state-owned steel giant PT Krakatau Steel Tbk (KRAS), Irvan Kamal Hakim, who was also present at the meeting, welcomed the government's commitment to safeguard the steel industry. He said, however, that the state should have instead focused on boosting the industry's competitiveness.
"Until today, Indonesia enforces one of the lowest import duties in the region, making us a lucrative market for other countries. Malaysia's import duties currently stand at 20 percent and it has even imposed an additional 24 percent antidumping duty on Indonesian steel," Irvan said. "We don't need protectionism; we just want to have a level playing field."
Previously, the government imposed a three-year safeguard duty that would affect I-shaped and H-shaped steel sections imported from China, South Korea and Singapore.
An investigation conducted by the Indonesian Trade Security Committee (KPPI) had found that imports of I-shaped and H-shaped steel surged significantly from a low level of 20,331 tons in 2010 to 395,814 in 2013.
These products will be charged at 28 percent of their prices this year and lowered to 26 percent and 18 percent in subsequent years until Jan. 20, 2018.
The safeguard measure is a procedure under the WTO that permits a government to act against an unusual increase in imports of similar goods from trading partners.
