Indonesian trade business – is it too difficult? Over the past week, news of government departments cracking down on illegal imported products has constantly shaken the nerves of traders and e-commerce practitioners. To be safe, many offline wholesale stalls have started to close their doors tightly, and many overseas warehouses have also suspended operations. Just last month, at the end of June, Indonesia's Trade Minister called for imposing safeguard tariffs of 100-200%. Indonesia's trade policies and regulatory enforcement have been in constant turmoil. What is the real reason behind this? Let Boss Wang try to explain:
Many believe that the trade turmoil is due to the upcoming government transition in Indonesia, with different stakeholders facing a reshuffle. That may have some influence, but Boss Wang believes the core issue is the Indonesian government's pressure to maintain employment. According to Indonesian media reports, 36 textile factories have closed in the past two years, and 31 are on the verge of closure. In 2023 alone, at least 150,000 textile workers in the textile and garment industry lost their jobs. Meanwhile, in the building materials sector, 7 ceramic tile factories have announced production halts. Indonesian society believes the reason is that imported textiles and building materials, with their price and quality advantages, have impacted local industries.
If we go back to 2023, the focus of public opinion was on e-commerce platforms, especially TikTok, which were flooded with cheap products that impacted offline physical stores. More than 90% of these cheap products were imported. In September of that year, the Indonesian President specifically mentioned in a speech that a shirt priced at 5,000 Indonesian rupiah constituted predatory pricing, which directly led to the beginning of Indonesia's tightening of trade supervision and import product controls, including raising the minimum transaction value for cross-border e-commerce to US$100, setting quotas and certification thresholds, etc., which have continued to this day.
The categories targeted by these events include textiles, clothing, footwear, cosmetics, electronics, ceramics, and steel products – basically labor-intensive industries and popular categories for Chinese entrepreneurs in Indonesia. The Indonesian government's decision-making logic is roughly as follows: employment issues affect public opinion, votes, and the legitimacy of governance. To protect jobs, they must go to great lengths to protect these labor-intensive local industries. Since trade policy adjustments have been superficial and limited in room for maneuver, strengthening supervision of imported products and vigorously tackling collusion between officials and businesses and illegal imports becomes a natural step. Boss Wang believes this involves little political factors and is not specifically targeted at China. Rather, it happens that Chinese products hold a dominant position in these industries in Indonesia.
Therefore, the fundamentals of Indonesia's open business environment have not changed. The Indonesian government still welcomes foreign investment, but foreign investors should adapt to the government's decision-making logic: change the traditional cross-border finished goods trade model, reduce finished product imports, ensure compliance in imports as much as possible, set up local processing or assembly plants, build local supply chains, generate local employment while making money locally, and maintain a balance between economic benefits and social benefits – this is what Indonesian policymakers hope to see.
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Live on TikTok: July 20/21, 21:00-22:00[/caption]
