Call The DMO Policy Ineffective, Researcher: It Can Even Distort Trading Opportunities!

Illustration (doc. between)

JAKARTA - Government policies through the Ministry of Trade (Kemendag) have begun to be criticized by a number of parties.

The policy of limiting export activities combined with a minimum portion of domestic supply is considered ineffective, and even has the potential to erode the great opportunities that should be obtained by the country from rising prices of a number of commodities in the international market.

"Policies like this (Domestic Market Obligation / DMO) are very doubtful in their effectiveness in the field, because they have the potential to distort trade and invite retaliation from trading partners," said Associate Researcher from the Center for Indonesian Policy (CIPS), Krisna Gupta, in an official statement, in Jakarta, as reported by Antara, Monday, March 14.

Rather than limiting the realization of exports under the pretext of securing supplies for the domestic market, Krisna further suggested that the government should focus more on increasing profits from rising commodity prices, which have been the mainstay of national exports.

"The government must try to get more benefits from rising commodity prices that are widely exported. The trick is to increase the portion or value of the export duty, so that it can be used to reduce the impact of inflation," said Krisna.

Krisna views that recently Indonesia's tax ratio is in trouble. On the other hand, the state's capacity to maximize tax revenues from commodities is no longer as high as during the oil boom.

"Even though increasing the value of export duties can be considered not ideal (to do), this can be a solution that has less distortion than the DMO (policy) or export ban," said Krisna.

Later, according to Krisna, the larger revenue from the export duty could be used by the government to support the needs of the community through the provision of direct subsidies. That way, people's purchasing power will be more maintained, so that the potential for inflation can be better mitigated.

"In addition, Indonesia also needs to be more active in global cooperation because with the disconnection of transactional trade relations between Russia and Ukraine from the global market, this will at least reduce commodity trade traffic, so it must be anticipated early on," said Krisna.