DEN: Industrial Relocation Trends Seen In The Last 1 Month, Impact Of 10 Percent US Tariffs On Chinese Imported Goods

Photo: Doc. Antara

JAKARTA - Member of the National Economic Council (DEN) Septian Hario Seto assessed that the trend of industrial relocation to Indonesia has been seen in the past month, as a result of the imposition of a 10 percent tariff by the United States (US) on Chinese imported goods.

Seto said that in the past month, the DEN received reports of several industrial relocations carried out to Indonesia, one of which was the laying of the first stone for a factory in the West Java area.

"There was one that yesterday I was reported to have grounded a factory in West Java. That's with 100 percent exports to America. So there is already a visible trend. But I think we need to work harder so that more and more people have moved and relocated to Indonesia," said Seto when giving a press statement at the Presidential Palace. Jakarta, quoted by Antara, Friday 7 February.

In his meeting with President Prabowo Subianto, Seto and other members of the DEN, Chatib Basri and Firman Hidayat reported a number of impacts from US President Donald Trump's policy.

One of its policies, namely the United States, has officially implemented new import rates to Canada, Mexico, and China after President Donald Trump signed an executive order.

The executive order stipulates a tariff of 25 percent for imported goods from Canada and Mexico, as well as 10 percent for Chinese imported goods.

According to Chatib Basri, the trade war between the US and China, as well as the imposition of an import rate of 10 percent, has the potential to make companies with a production base from China move their industries to countries that are not subject to import rates, one of which is Indonesia.

Therefore, Indonesia must be able to take advantage of the opportunity from this condition, considering that neighboring Vietnam is also the target of investment for companies to carry out industrial relocation.

"Because there is a relocation from the production base from China to Vietnam and maybe if Vietnam is too full, it will run to Indonesia. So there is a kind of simulation carried out from its calculation that it benefits Indonesia," said Chatib.

On the other hand, Indonesia must carry out reforms to attract these opportunities, ranging from improving the investment climate, consistent policies to ensuring and ease of doing business.

The sectors that have the potential to be affected by the relocation include manufacturing and various industries previously based in China. The company will seek locations with more competitive production costs to avoid high tariffs imposed by the US.

Furthermore, Chatib emphasized the importance of bureaucratic reform through digitization or GovTech in order to accelerate the administrative process and increase Indonesia's investment appeal.

He considered that accelerating digitalization in government systems could help improve the investment climate and ensure that Indonesia really benefited from this shift in the global supply chain.