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Implementing concrete policies and clear indicators of administrative performance are ways to accelerate the use of local products. A mechanism of reward and punishment can also be implemented to encourage the absorption of local products.

Research manager Badiul Hadi at the national secretariat of the Indonesian Forum for Budget Transparency (Fitra) said on Monday (5/9/2022) that the effort to encourage local products must be realized as concrete policies.

“A concrete legal umbrella is needed, for example, in a technical regulation [issued by] the home minister that requires a certain percentage of the budget to be allocated for local products, which can later be evaluated. The Home Ministry, as the supervising authority of regional administrations, can also use the budget allocation for local products as an indicator to evaluate the performance of regional administrations,”

Badiul Hadi, Manager Research

With a legal umbrella, according to Badiul, the use of local products can be accelerated. Learning from the 1998 financial crisis, the strongest contributors to the economy were micro, small and medium enterprises (MSMEs). This meant that the government’s policy to encourage the local products of MSMEs and cooperatives was appropriate.

On the other hand, a reward and punishment mechanism could also be implemented to accelerate policies supporting local products. The government had a regional incentives fund (DID) that was given to regions with good performance in regional financial governance, public services, basic public services, and community welfare. This scheme could be used to encourage regional competition in local products.

“The government has a benchmark of which regions have optimized the use of local products and which ones have not. This has an impact on the amount of DID that is given. This policy is more concrete, and it has indicators to implement a reward and punishment mechanism,”

Badiul Hadi, Manager Research

In line with the government’s policy to divert the fuel subsidy fund, Badiul added, there was a social cushion of around Rp 24 trillion that should be encouraged for allocating to optimizing the use of local products.

Improvement efforts

A number of regional heads complained about registering local products with the e-catalog managed by the National Procurement Agency (LKPP) during the Municipal Leaders-Kompas Collaboration Forum (KCF) discussion on Saturday (3/9). Titled “Optimizing the Use of Local Products for Economic Recovery and Anticipating Recession”, the discussion was held in collaboration between Kompas and the Association of Indonesian Municipalities (Apeksi).

Pangkal Pinang Mayor Maulan Aklil, for example, was not aware of the procedures and requirements for listing local products in the e-catalog. “In the future, we will try to coordinate with the LKPP so that more of our local products are included in the e-catalog. Pangkal Pinang is a trade, service and industrial city, so the market is good,” he said.

In relation to this, LKPP chairman Abdullah Azwar Anas said that the agency had simplified the process for registering local products in the e-catalog, and that the LKPP disseminated information about the e-catalog through daily online meetings.

The LKPP had also opened a free consultation channel for use by local administrations. If necessary, LKPP officers were ready to travel to a region to help local administrations solve any problems related to the e-catalog. “Initially, there were eight stages in the registration process, which has now been reduced to two stages,” he said.

Denpasar Mayor I Gusti Ngurah Jaya Negara added that Bali’s provincial capital would take advantage of the LKPP’s shortened registration process by increasing the number of local products included in the e-catalog. He also encouraged businesses to register their products, especially those in the food sector, which had been reluctant to join the e-catalog because payments took a long time.

With regard to this matter, Anas said, the government was launching the Domestic Government Credit Card to speed up and facilitate payments to businesses and overcome payment barriers.

“This Domestic Government Credit Card will be held by [regional] officials making the commitments. Starting from October, hopefully it will be used in all regions,” said the former regent of Banyuwangi, East Java.