Product purchase

Fueling economic growth through the purchase of national products

The World Bank (WB) has revised down its economic growth forecast for Indonesia for 2022 to 5.1% from 5.2% due to the Russian-Ukrainian war.

This figure is slightly higher than the economic growth forecast of 5% for East Asia and the Pacific.

Several countries, such as Malaysia and Indonesia, were not too vulnerable to a war-induced rise in commodity prices.

China, Indonesia and Vietnam have currently exceeded pre-pandemic production levels, while Cambodia, Malaysia, Mongolia, the Philippines and Thailand are expected to do so later this year, according to the World Bank.

The World Bank’s chief economist for East Asia and the Pacific, Aaditya Mattoo, said various upheavals caused by war and related sanctions could have the most concrete impact on the region. Asia and the Pacific, including disruptions in the supply of raw materials, increasing pressure on the financial sector. , and declining global confidence.

The East Asia and Pacific region’s direct dependence on Russia and Ukraine for the import and export of goods, services and capital is still limited, but the war and related sanctions will likely raise international food and fuel prices, to the detriment of consumers. and growth.

Commodity-exporting countries, such as Indonesia and Malaysia, can stem international price increases more easily than commodity-importing countries, such as Fiji and Thailand.

For this, Mattoo suggested that the governments of countries in East Asia and the Pacific reconcile their spending needs due to the increasingly strict budgetary constraint by pledging to restore budgetary discipline and reapply the budgetary regulations, as planned by Indonesia in 2023.

Related news: Indonesia braces for economic impact of Russian-Ukrainian conflict

Meanwhile, President Joko Widodo (Jokowi) has ordered that 40% of the state budget (APBN), regional budget (APBD) and public enterprises budget (SOE) be used for the purchase of national products .

“Just use 40% of these budgets to trigger our economic growth from central government to local government,” he urged.

The head of state noted that the central government has a procurement budget of Rs 526 trillion, while each provincial, city and district government has a budget of Rs 535 trillion. and that public enterprises have a budget of 420 trillion rupees. He then asked them to allocate 40% of their budgetary expenditure to the purchase of national products.

If 40% of the budget is used for the purchase of national products, spending by public enterprises could stimulate economic growth by up to 0.4%, while purchases through national and regional budgets could stimulate economic growth by 1 .5 to 1.7%, Widodo explained.

“We don’t need to find investors; we constantly have to buy goods produced by factories, industries, our micro, small and medium enterprises (MSMEs),” he stressed.

He also asked ministries and local governments to stop buying imported products.

“Do we want to keep buying imported goods? No. We can’t. By buying imported goods, it means we are giving jobs to other countries. Our money and capital outflow will go directly to other countries. country,” he noted.

If ministries, regional governments and state enterprises purchase domestic assets, there would be additional capital and investment from domestic contractors that could open up more job opportunities, he said.

It has been calculated that this could create two million jobs, he added.

The president also said that not all parties have actually spent their budgets on purchases of domestic products.

“We are just asking for 40% of your budget for domestic products until May 2022. This morning I checked, it was only Rp 214 trillion. If it is already at Rp 400 trillion, then this will be fine,” he remarked.

Related news: Using local products to compete with foreign products: Minister of MSMEs

Meanwhile, the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, is aiming to boost the Government’s Domestic Product Expenditure (DNP) through electronic catalogs to Rs 500 trillion this year , more than the previous target of 400 trillion rupees.

“Government expenditure on National Products (NDP) in 2022 is targeted at Rs 400 trillion and we have previously reported this to the President, if we can continue to increase it maybe up to Rs 500 trillion in April and be completed on May 31, then the numbers on the economy growth will be visible this year,” Pandjaitan said.

Pandjaitan explained that based on Statistics Indonesia (BPS) calculations, if 400 trillion rupees of government expenditure is spent nationally, it would encourage economic growth of around 1.6% to 1.7%.

“The government has estimated economic growth at about 5.0-5.2 percent this year. With the addition of 1.0 percent to 1.7 percent, our economic growth will be about 6 percent higher,” he said. he declared.

This action can create demand for domestic products and strengthen supply through capacity building for industrial development and new investments.

“I think it’s very good because the government is the biggest buyer,” he said.

To support expenditure commitment on national products, the government continued to encourage the acceleration of the training of the team for increased use of national products (P3DN team) across Indonesia, in addition to those existing in 25 ministries/institutions, 8 states-private companies and 103 regional governments.

In addition, the National Public Procurement Agency (LKPP), Ministry of Industry, Ministry of Interior and Ministry of Finance have made improvements to the government digital procurement ecosystem to support the accelerating non-cash payments through government credit cards with QRIS (Quick Indonesian Standard Response Code).

“With a government credit card, it will reduce our costs by around 20-30%. Therefore, whether we like it or not, it will be more efficient in the future,” said the Coordinating Minister.

The government is preparing an electronic catalog for the purchase of goods and services to absorb national products. The electronic catalog currently includes 200,000 local products and aims to have one million products by the end of 2022.

The Indonesian Product Pride Affirmation Act was preceded by a business matchmaking event for purchases of domestic products from March 22-24, 2022, which resulted in deals worth $85 trillion rupees.

Based on the simulation results conducted by Statistics Indonesia (BPS), the purchase of domestic products worth Rs 400 trillion could increase the national economic growth by 1.67-1.71%.

If the economic growth in Indonesia was 3.69% in 2021, then by maximizing the use of domestic products, the Indonesian economy can be boosted up to 5.36%.

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