Indonesia has issued a regulation to protect its domestic steel industry from illegal steel imports, officials said on Friday, at a time when the government it promoting local goods to drive economic growth. Indonesia's trade policies are attracting close attention amid a global economic slowdown.
The new steel regulations follow a debate in the government over the introduction of a "Buy Indonesian" policy, whereby the country's nearly four million civil servants would have to use local products, ranging from shoes to heavy machinery, to boost domestic demand.
The proposal has caused friction between the trade and industry ministries, according to local media, as well as a public outcry. Government officials deny that the measures are protectionist. While Southeast Asia's biggest economy is forecast to grow 4-5 percent this year, it has seen a sharp slump in some exports in recent weeks.
Under a new regulation, all steel imports will have to be verified by independent surveyors at the loading ports before being shipped to Indonesia, Diah Maulida, director general of foreign trade at the trade ministry, told a press conference on Friday. From April 1, steel producers and importers must register with the trade ministry, Maulida said, adding that the regulation will be effective until December 2010.
"Producers are now looking for markets for their products and Indonesia is one of the targets because it is a safe haven for illegal imports," said Anshari Bukhari, director general of metals, machinery, textile and miscellaneous industry at the industry ministry, who spoke at the same press conference. With the global slowdown, demand from the construction industry and car manufacturers for steel has fallen, sending global steel prices into a free fall in the second half of 2008.
Steel products that are subject to the new import regulation include hot-rolled coil and plate, cold-rolled coil, wire rod and coated-steel products. But the regulation will not apply to imports of steel under bilateral agreements such as under the Indonesian-Japan economic partnership agreement. Steel products which are not made locally, including special steel for the automotive, electronics and shipbuilding industries, are also exempt.
Imports of steel products nearly trebled in 2008 to 9 million tonnes, from 3.4 million tonnes in 2007, as local steel producers rushed to buy semi-finished products at a time of rising prices, data from Indonesian Iron and Steel Industry Association (IISIA).
"But imports may come down to just 1.5 million tonnes this year," Hidajat Triseputro, the association's chairman said. Indonesia produced 5.3 million tonnes of steel products in 2008. PT Krakatau Steel, Indonesia's biggest steel producer, expects sales to decline nearly 17 percent to 15.8 trillion rupiah this year on falling steel prices and weak demand, the firm said on Thursday.
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