‘US tariffs put ‘significant pressure’ on Indonesia’s industrial estates’
Industrial estate managers say US import tariffs and anti-China trade policies are forcing them to resort to operational and regulatory measures
JAKARTA, Indonesia (MNTV) – Industrial estate managers say United States import tariffs and anti-China trade policies are a burden on their business, forcing them to resort to operational and regulatory measures, as well as diversification, to ensure their global competitiveness.
Batam Free Trade Zone Authority (BP Batam) undersecretary for investment Fary Djemi Francis told The Jakarta Post that the 32% percent tariff the US plans to impose on goods shipped from Indonesia would present “significant pressure” on Batam’s export industries, particularly electronics, furniture and solar panels.
Batam is home to dozens of industrial estates that host more than two dozen manufacturing industries, ranging from food and beverages to metals.
Despite the pressure, Fary said, the tariffs “are not the end of the story [but rather provide] an opportunity for comprehensively reinforcing the industrial structure and the region’s strategy”.
Fary elaborated that the first of three steps BP Batam planned to take was to push downstream development further, since more advanced manufactured goods could increase margins by 20 to 40 percent, “which is enough to absorb the new tariff burden”.
Moreover, the region was seeking to expand the range of target countries for its products. The undersecretary said Batam was now actively trading with Australia, the United Arab Emirates (UAE), Japan, South Korea and Europe.
The third step was to reform the investment climate by making regulations more business-friendly and expediting procedures.
“The tariff will become burdensome, but it’s not the end of everything. Indonesia has proven to be resilient in facing big crises, such as those of 1998 and 2008,” noted Fary.
PT Kawasan Industri Terpadu Batang, the manager of Batang Integrated Industrial Estates, now called Batang Industropolis, said that it believed Indonesia would remain “competitive and relevant” despite the global tariff dynamics and the transshipment crackdown by the US.
Transshipment refers to the transfer of cargo between different modes of transportation or rerouting it through different locations before shipping it to the final destination. The issue was highlighted by US President Donald Trump.
Centre for Strategic and International Studies (CSIS) Indonesia analyst Riandy Laksono said the idea behind stymying transshipment was to block not just products made in China but also those made by China.
How exactly the US defines circumvention measures matters to Indonesian industrial estates, many of which rely heavily on investment from China, but Washington has not clearly delineated such practices, which complicates efforts by countries negotiating with the US.
Asked about what kind of sweetener Jakarta could offer to appease Washington, Riandy said: “It’s difficult”, given the uncertainty of transshipments.
“Whatever sweetener [is offered] will not be enough without our commitment to [stopping] transshipments,” said Riandy.
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