Gloomy year for manufacturing sector<\/p>\n
Johannes Simbolon, The Jakarta Post, Jakarta<\/p>\n
The country's manufacturing industries were mostly in the
\ndoldrums at the beginning of the year. Twelve months later, most
\nof them remain in bad shape and are anticipating another gloomy
\nyear.<\/p>\n
Most of the manufacturing industries have projected a drop in
\nexport revenue this year and a further decrease in exports next
\nyear.<\/p>\n
For instance, the Indonesian Footwear Association, which
\ncontributed US$2 billion in export revenue in 2000, projected the
\nindustry's export revenue this year at $1.3 billion, down from
\n$1.6 billion last year.<\/p>\n
\"In 2003, this labor-intensive industry is going to be locked
\nup in its gloomiest ever. We'll be grateful if export value will
\nreach $1 billion,\" association chairman Anton Supit said, adding
\nthat about 100 shoe manufacturers had closed their operations in
\nthe past three years.<\/p>\n
The furniture industry, which is also a major industry in the
\ncountry, is also envisaging a gloomy future.<\/p>\n
Yos S. Theosubrata, chairman of the Indonesian Furniture Club,
\nsaid the industry's export revenue was projected to decline to
\n$1.04 billion this year, from $1.8 billion last year. The export
\nrevenue will further slump to below $1 billion next year.<\/p>\n
The textile and garment industry, which is the country's
\nlargest foreign exchange earner in the non-oil and gas sector,
\nwas also experiencing a downturn.<\/p>\n
Sunjoto Tanudjaja, the head of international relations and
\nforeign trade at the Indonesian Textile Association predicted the
\ncountry's garment and textile exports would fall to $7 billion
\nthis year, from $7.6 billion. The industry booked a record
\nperformance throughout the economic crisis in 2000 with total
\nexports of $8.377 billion.<\/p>\n
The association's data says that 76 garment and textile
\nmanufacturers had ceased activities in the past several years,
\nwhile another 40 firms were running at a loss this year.<\/p>\n
The industry is facing such a grave situation that one
\nexecutive of the association predicted this year that it could
\ncollapse within several years.<\/p>\n
The electronics industry, which is one of the country's
\nlargest foreign exchange earners outside the oil and gas
\nindustry, did not fare well either this year.<\/p>\n
Thus far, the Association of Indonesian Electronics Producers
\n(Gabel), which are mostly composed of South Koreans and Japanese,
\nis reluctant to make statements about their estimated revenue for
\nthis year and next year. But, many analysts believe the industry
\nis also facing serious problems, which is evidenced by the shock
\ndecision by Japanese giant Sony Corp. late November to relocate
\nits audio manufacturing plant to Malaysia.<\/p>\n
The country's electronics exports dropped to $5.91 billion
\nlast year, from $6.45 billion a year earlier.<\/p>\n
Minister of Industry and Trade Rini MS Soewandi apparently
\nshares the pessimism prevailing in the manufacturing sectors, as
\nreflected in her statement in the middle of the year that aside
\nfrom the oil and gas sector, the main driver of export growth
\nnext year will be the agricultural sector rather than the
\nmanufacturing sector. Still, the minister believed the country's
\nexports could grow five percent next year.<\/p>\n
Problems confronting the manufacturing sectors range from
\nexternal factors, including the tougher competition launched by
\nproducers in other countries, particularly China, to internal
\nfactors, including high labor costs, numerous illegal levies,
\nlegal uncertainties, security problems, smuggling and burdensome
\nfiscal policy.<\/p>\n
The shoe industry said the security problems and labor issues
\nhad created fear among foreign buyers that local shoe
\nmanufacturers could not meet product delivery on time, prompting
\nthe buyers to seek alternative suppliers in other countries like
\nChina and Vietnam.<\/p>\n
Rising production costs following the increase in electricity
\ntariffs, fuel prices and labor wages have also hurt the
\ncompetitiveness of the country's shoe industry, according to
\nindustry players.<\/p>\n
Players in the furniture industry said the excessive levies
\nimposed by provincial governments and rising labor wages were the
\nmain internal factors that hurt the competitiveness of Indonesian
\nfurniture.<\/p>\n
Indonesian producers also face tougher competition from
\nChina's producers, who could make cheaper furniture products
\nusing illegally-cut logs smuggled from Indonesia to the country,
\naccording to industry players.<\/p>\n
\"Many buyers have postponed placing orders for Indonesian
\nfurniture because China offers cheaper prices with the same
\nquality wood,\" Yos of the Indonesian Furniture Club told The
\nJakarta Post.<\/p>\n
Meanwhile, the electronics industry said the government's
\n\"burdensome\" fiscal policy and smuggling were the main obstacles
\nfor them to expand their manufacturing operations in the country;
\nwhile the textile and garment industry singles out smuggling as
\nthe most damaging factor to their business.<\/p>\n
In fact, smuggling has become an enduring issue throughout the
\nyear to which the industry players and the government were
\nstruggling to find solutions in vain.<\/p>\n
The country's electronic manufacturers blamed their shrinking
\nshare in the domestic market on the smuggled goods, which were
\nsold cheaper than the locally-made products. They repeatedly
\nwarned the government that unless the smuggling issue was solved,
\nthe country's manufacturing industry would become history in the
\nnot-so-distant future.<\/p>\n
A similar warning was voiced by the textile and garment
\nmanufacturers, who have become much more dependent on the
\ndomestic market for survival amid the decline in their shares in
\nthe export market.<\/p>\n
The Crisis Center set up by Minister Rini and several
\nbusinessmen to solve problems in the business sectors also put
\nsmuggling on top of its priority list of problems that urgently
\nneeds solutions.<\/p>\n
In response to the business sectors' demand, the government
\nset up an anti-smuggling task force comprising ministers in
\ncharge of economic affairs, the police chief and the military
\ncommander early this year, but the results of their work remains
\nunclear as complaints from industry players about the influx of
\nsmuggled goods continue.<\/p>\n
Disappointed by the failure of the notoriously-corrupt customs
\noffice to curb smuggling and other customs-related fraud, many
\nbusinessmen, supported by Rini, called for the reinstatement of
\nthe pre-shipment inspection scheme to take over the inspection
\njob of the customs office on imported goods.<\/p>\n
Thus far, the government prefers to reform the customs office
\nby hiring foreign surveyors to conduct the pre-shipment
\ninspection.<\/p>\n
Due to the strong pressure from the business community and the
\ngovernment, the customs office announced several programs in the
\nlast months of the year, including the controversial re-
\nregistration of importers, in a bid to curb smuggling and other
\nfraud. The programs will be fully implemented next year.<\/p>\n
Should the programs bring fruit, next year may be not as
\ngloomy as this year for the country's manufacturing sectors.<\/p>",
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