The Institute for Development of Economics and Finance (Indef) assesses that the Ministry of Industry's target to reduce imports by 35 percent by 2022 is ambitious. Head of Indef's Center for Industry, Trade and Investment, Andry Satrio Nugroho, said that this figure is quite ambitious considering the limited capacity of the domestic raw material industry. Such efforts also require a large investment with a timeframe unlike turning the palm of the hand. "The target of the Ministry of Industry is very ambitious. If it is not feasible, it will also harm the industry. If we encourage exports, this is a good thing," Andry said recently.
Restrictions on imports of raw materials and auxiliary materials, if not accompanied by the ability to supply from within the country, will disrupt industrial productivity. Along with long-term efforts to substitute imports, he encouraged the government to also strengthen certain industrial structures.
"Import substitution is okay, but don't let it interfere with the industry that has existed so far and of course it takes a long time," he continued.
Minister of Industry Agus Gumiwang Kartasasmita previously explained that the import substitution target in 2021 was 20 percent. However, he admitted that last year's achievements were not as targeted. From a 2019 basis, imports of raw materials and auxiliary materials amounted to IDR 434 trillion.
In 2022, the target for the reduction is set at IDR 152 trillion or 35 percent. A number of sectors that are expected to be the drivers of import substitution include the chemical and pharmaceutical industries, textiles, metals, machinery, electronic equipment, and the agro industry.
"In 2021, we are targeting import substitution to reach 20 percent. We need to admit that for some reasons, 20 percent has not been achieved, although we are still optimistic that our target of 35 percent can be achieved," he said.