JAKARTA - INDONESIA'S policies to tackle imports and drive domestic demand are not protectionist, but are necessary to curb smuggling, meet safety rules, and spur growth at a time of global economic crisis, the trade minister said.

Southeast Asia's biggest economy, a top producer of tin, palm oil and other commodities, has been hit by the global slowdown. Exports slumped, the rupiah fell to a decade low against the dollar, and growth prospects have dimmed.

The government, which faces elections next year, has issued restrictions on foreign exchange, and is encouraging domestic spending, while pushing ahead with longer-term reforms of customs and other departments in order to stop illegal imports.

The result: foreign wines and cheeses have vanished from some hotels and supermarkets, prompting an avalanche of angry letters from tourists and 'dismayed-of-Jakarta' to the local media.

A few politicians are taking a more protectionist stance, calling for curbs on certain imports, restrictions on foreign goods or services, for example in the health sector, and urging campaigns to 'buy local'.

'We should not interpret that as Indonesia becoming more protectionist,' Mari Pangestu told Reuters in an interview on Friday, adding that all of the country's policies are within the World Trade Organisation's (WTO) framework.

'It's a lot of noise. People are calling for it, but it doesn't necessarily happen. It's not just Indonesia. I'm sure in the U.S. and everywhere everybody is wanting to have protection.'

Stimulus

The prospect of slower global economic growth is prompting Indonesia to turn to its huge domestic market of 226 million people in order to keep GDP growth ticking along at 6 per cent or more and to reduce unemployment of about 10 percent.

'A drive to buy local should not be considered as protectionist,' said Ms Pangestu, who frequently promotes Indonesia's local crafts and designers at home and abroad.

'At a time when we know the domestic market is going to be our main source of growth, especially in the year ahead, we felt it's important to have this push for appreciating your own products,' she said, adding that countries such as South Korea 'automatically go into that mode' at times of economic hardship.

Infrastructure spending will help to drive domestic demand for locally produced cement and steel, Pangestu said, while tax incentives may be introduced to provide additional stimulus, for example, with the government paying sales tax on certain products.

Problems over imports of food and wine, particularly important for the tourism sector, are being resolved, she added.

Indonesia was one of several countries to discover melamine in food products imported from China, prompting the authorities to clamp down on importers and retailers to make sure imported food was correctly labelled.

Meanwhile, the government's anti-graft drive - which targetted the notoriously corrupt customs department - exposed widespread smuggling and under-invoicing of wines and liquor.

Now, some say, importing alcohol has became prohibitively expensive and is starting to hit tourism, especially in the resort island of Bali, where there are several luxury hotels and restaurants.

'We are aware of the problem and we are revising the system to improve the implementation and ensure that there will be sufficient imports for the needs of tourism and hotel and restaurants,' Pangestu said.

'The import restrictions are for goods that tourists have come to expect to be available. If continued, this may become an issue whereby visitors choose to go elsewhere,' wrote Robert of Denpasar, Bali, in a letter to the Jakarta Post. -- REUTERS