Electronics still shielded by protection<\/p>\n
JAKARTA (JP): Indonesia's electronics industry is too
\ndomestically-oriented and dependent on the government's
\nprotectionist policies, an expert said.<\/p>\n
Farid Harianto, a visiting professor at the Center for
\nInternational Studies of the Canadian University of Toronto, said
\nover the weekend that Indonesia's industrial policies on the
\nelectronics industry differ from those of other countries in the
\nregion in terms of their orientations toward domestic market,
\ncoupled with relatively high trade protection.<\/p>\n
\"The domestic-oriented electronics industry is a product of
\nthe protectionist regime,\" Farid told a World Bank-sponsored
\nconference on deregulation.<\/p>\n
Export-oriented electronics firms in Indonesia have developed
\npractically since 1991, stimulated by export-oriented direct
\nforeign investments which came rather belatedly, as compared to
\nthe experience of neighboring countries, such as Singapore,
\nMalaysia and Thailand.<\/p>\n
The entry of export-oriented electronics firms have brought
\nsome impressive results. Exports of electronic products increased
\nrapidly to about US$2 billion last year from $1.2 billion in 1993
\nand only US$102 million in 1989.<\/p>\n
Currently the government protects the country's domestic-
\noriented electronics industry by imposing import tariffs of an
\naverage of 40 percent in addition to a luxury tax of about 10
\npercent.<\/p>\n
Inefficient<\/p>\n
Farid noted that domestic-oriented electronics firms are
\nmostly inefficient but still enjoy good profit margins because of
\ncontinued protection.<\/p>\n
In the domestic market, Farid said, retail prices of
\nelectronic goods in 1993 averaged 33 percent higher than
\ninternational prices.<\/p>\n
Similarly, factory prices of selected consumer electronic
\ngoods were about 27 percent higher than those in Singapore due to
\ninefficiency and high costs of imported materials.<\/p>\n
Farid said the protection given to domestic producers reduces
\nthe efficiency of all related domestic companies.<\/p>\n
\"We observed that local suppliers spent less efforts to earn
\nequivalent or higher profits by catering to the domestic-oriented
\nfirms than to the export-oriented ones, simply because
\ninternational standards were harder to meet and the profit
\nmargins were lower.<\/p>\n
\"As a result, the protection given to the domestic markets has
\ncreated a significant disincentive for the development of truly
\ninternationally competitive supply industries,\" Farid said.<\/p>\n
He noted that many parts and components for exports are still
\nimported due to quality problems of the domestic industry and a
\nrelatively small domestic demand.<\/p>\n
Many of the high value-added components, such as cathode ray
\ntubes, integrated circuits, discrete semiconductors and magnetic
\nheads are still largely imported. Only a very limited range of
\nlocally-made components are used, comprising mainly of simple
\ncomponents such as plastic and metal parts, packaging and passive
\ncomponents.<\/p>\n
To boost downstream production, import duties on parts and
\ncomponents have been lowered to between zero and five percent
\nsince 1990.<\/p>\n
Interestingly, Farid noted that the existing protection also
\ncreates a situation in which domestic-oriented producers are
\nexposed to competition from unintended sources, namely smuggling.<\/p>\n
He indicated that 30 percent of the domestic demand for
\nconsumer electronics is fulfilled by illegal imports, which
\nprovides effective competitive pressure for domestic-oriented
\nfirms.<\/p>\n
A rough estimate for 1993 indicated that some US$180 million
\nto $200 million out of about $750 million domestic demand for
\nconsumer electronics was met by imports, of which only US$30
\nmillion were recorded as legal. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/electronics-still-shielded-by-protection-1447893297",
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