Linda Yulisman, Jakarta – The House of Representatives on Thursday passed the industry bill into law to promote, among other things, the enhancement of downstream activities, replacing the obsolete Industry Law issued in 1984.

Officials say the new law will serve as a game changer in the country's industrial development. Once it is effective, the law is expected to help the local industry cope with new challenges resulting from rapid economic development, including globalization and trade liberalization.

"With the House's approval, the law will from now on serve as a strong legal basis to ensure the development of the domestic industry. Apart from that, it is expected to help create an independent, advanced and competitive Indonesian industry," said Erik Satrya Wardhana, who chairs the House's working committee that deliberated the bill.

The law comprises 17 chapters and 125 articles on various vital industrial issues, such as a master plan for industrial development, industrial zoning, the development of industrial resources, industry defense and safeguard and the green industry.

Industry Minister MS Hidayat said the new law would be essential for determining the direction of industrial development, highlighting programs the government was promoting, including the downstreaming of the local industry.

"The 1984 Industry Law, effective for nearly 30 years, cannot sufficiently address the problems we are facing today and the highly dynamic industrial growth. The new law will help us improve the competitiveness of our domestic industry ahead," Hidayat told reporters on the sidelines of the plenary session.

To support the full implementation of the law, the ministry would early next year work on a series of derivative regulations, Hidayat said. Another priority would be to design a long-term master plan on industrial development, he added.

"It will be a grand strategy for 20 years, of which steps will be phased in five years. It will integrate efforts that we're now carrying out sporadically," Hidayat said, underlining the similarity of the master plan with the five-year state policy guidelines the country implemented in the past for national planning.

In addition to this, the law also requires the establishment of the so-called national industry committee, which Hidayat said would be ad hoc in nature and would work in coordination with related stakeholders both within and outside the government.

The Industry Ministry's director general for international industry cooperation Agus Tjahajana said the new law provided the much-needed instruments to help the domestic industry shoulder problems created by heightened international trade in addition to trade measures such as trade remedy.

"It mandates the Industry Ministry to boost the competitiveness of our domestic industry by way of empowering existing resources, such as capital and locally-sourced raw material," Agus said.

At present, Indonesia applies an average 6.8 percent duty on imported products, much lower than other emerging economies such as China (9.6 percent), Brazil (13.7 percent) and India (13 percent). To a certain extent, that eases barriers for imports, and consequently, has posed serious challenges for the local industry, which in the past decade had struggled with deindustrialization.

Hendri Saparini, executive director of the Center of Reform on Economics (CORE), however voiced her criticism of the new law, saying that industrial policy and strategy should come before a law on industry, along with a law on trade.

"The industrial policy and strategy will serve as a reference to seek solutions to develop industry to figure out what kind of trade policies, fiscal policies and monetary policies are necessary to reach the industrial goals. Then later, we have the law as an instrument to achieve the ends," Hendri said.

Key points in industry bill:

• Article 31: To increase added value of natural resources, the government pushes for the development of a domestic processing industry.
• Article 44-45: The government facilitates competitive financing for industrial development through state-owned enterprises and private firms.
• Article 63: In certain cases, the government pioneers the development of industrial estates.
• Article 84: Strategic industry is controlled by the state.
• Article 97: Industry defense measures are determined by the President with recommendations from ministers.
• Article 100: The government can defend any industry that suffers losses resulting from global economic pressure through fiscal stimulus and credits.