Hope for the future in manufacture and trade<\/p>\n
Rini M.S. Soewandi, Jakarta<\/p>\n
The reality of Indonesia's trade and industry today can best
\nbe described as a wheel of interlocking problems and
\nopportunities. To unlock the opportunities and make them a
\nreality, it is necessary to work on the problems, each one of
\nwhich reacts upon the other, making it very difficult to create
\nsuccessful initiatives in one particular area, without at the
\nsame time, looking at how this will affect the rest of the
\n"wheel".<\/p>\n
The first priority set for me was to improve the people's
\nwelfare, the majority of which are the group of farmers.
\nIronically, the work that I and my staff at the Ministry of
\nIndustry and Trade have done in this area is not thoroughly seen
\nas a positive effort.<\/p>\n
All of the policies that have been implemented are the result
\nof much discussion between officials at my ministry and related
\nministries and have been fully discussed and approved by the
\nHouse of Representatives.<\/p>\n
Our initial concentration on the welfare of the farming
\ncommunity recognizes that this group still constitutes around 30
\npercent of our workforce. Thus, some 63 million Indonesians are
\ndirectly dependent on the agricultural sector for their
\nlivelihood.<\/p>\n
The vast majority of our farmers are smallholders whose fate
\nis determined by external factors, right up to the cartels that
\ncontrol the global trade in commodities. It is for this reason
\nthat much effort has been expended by the Department of Industry
\nand Trade in the area of trade negotiations.<\/p>\n
It is very clear that the international trading environment
\nfor basic staples is far from level. The people of Japan, the
\nUnited States and the European Union lavish far more funds on
\ntheir cows and crops than we in Indonesia can possibly hope to
\ngive our farmers. Farmers in these developed communities are paid
\nto produce inefficiently and, in the U.S., the practice of
\nsubsidies goes so far as to pay farmers not to produce certain
\ncrops.<\/p>\n
Even Thailand, a partner in ASEAN, subsidizes its rice
\ngrowers, producing the price imparities that provide room to move
\nfor smugglers who seek to undermine the livelihood of our farmers
\nfor their own personal gain.<\/p>\n
In recognition of the unfair playing field in vital
\nagricultural products, Indonesia has developed over the past
\nthree years a role as a leader of the developing nations in
\narguing for better conditions within the World Trade Organization
\n(WTO). We have achieved the right to "exclude" basic staple
\nfoodstuffs from WTO tariff reductions in order to protect our
\nfarmers from the worst excesses of this unfair international
\ncompetition.<\/p>\n
The ministry has also been active in creating new
\nrelationships with trading partners that provide the promise of
\ndiversification away from our traditional markets of the U.S.,
\nEurope and Japan.<\/p>\n
In just the most recent of the agreements with "non-
\ntraditional" markets, Indonesia and Saudi Arabia have agreed to
\nseek ways to double their bilateral trade to US$1 billion next
\nyear.<\/p>\n
We have ended a decades-old practice in urging Singapore to
\npublish its full trade statistics with Indonesia. For its own
\nreasons, Singapore has yet to meet our repeated requests for full
\ndisclosure (as required of it under WTO rules) and it becomes
\nanother task for the new administration to urge the publication
\nof statistics that we believe can tell as much about the amount
\nand nature of smuggling that so severely affects our economy.<\/p>\n
In domestic trade, a major focus has been to shorten the
\ndistribution chain between producer and end user. In the
\nagricultural sector, we have introduced direct crop auctions that
\nhave demonstrated the ability to both reduce the costs of getting
\ncrops from the producer to the market, a move that benefits both
\nthe consumer and the grower by cutting out unnecessary middlemen.<\/p>\n
We have also made a number of changes in the area of taxes, in
\nparticular, value added tax for export, such as that for cacao,
\nagain import tax for gold was cut to encourage the development of
\nthe Indonesian jewelry industry, one that has great potential to
\nemploy many more people.<\/p>\n
Many of these policies introduced by the ministry are aimed at
\ndeveloping industries that add value to our basic products. Other
\ninitiatives have aimed to develop the production of components
\nfor our industries that can replace imported input. Much more
\nremains to be done in this area.<\/p>\n
In our leather goods sector, for instance, raw hides are
\nexported for processing and then re-imported for our footwear and
\nleather goods industries, clearly increasing the cost of
\nproduction and making our industries less than competitive.<\/p>\n
Much of the work done by the ministry over the past three
\nyears has revealed basic shortcomings in our industries. The
\nMinistry of Agriculture has, for instance, been encouraging the
\nplanting of improved strains of sugar for our farmers.<\/p>\n
Protection has been provided in the form of import bans and
\nimport tariffs in order to provide a breathing space for
\nindustries such as this while productivity is increased. Such
\ninitiatives will take time, but it is essential that rejuvenation
\nof our industries proceeds under the new administration so that
\nwe can then relax these protectionist barriers.<\/p>\n
My ministry has also been active in lobbying the Ministry of
\nFinance and the banking sector to be more accommodative to
\nindustries such as the textile and garment sector. While the end
\nof the quota system for textiles and garments in the U.S. and
\nEurope will make some of our low-end products uncompetitive, we
\nstill have competitive advantage in more sophisticated products.<\/p>\n
It thus seems very clear that the way to retain our strong
\nrole in the global export trade in textiles and garments is to
\nencourage investment in new machinery. In recent months we
\nfinally won agreement from the banking sector to look at sector
\ncompanies on a case-by-case basis, rather than continue applying
\na blanket ban on any loans to the sector.<\/p>\n
Perhaps the greatest challenge is to combat smuggling, and in
\nthis area the new administration's promise of tighter security
\nbrings promise of a new attempt to finally scourge this parasitic
\npresence from Indonesian life. The Megawati government, through
\nmy ministry and other institutions, has tried hard to stem
\nsmuggling, but with little success.<\/p>\n
The challenge of stopping smuggling, and with it the loss of
\njobs for Indonesians, is unfortunately not just a matter of
\nmotivating our customs staff and personnel of other institutions
\nthat guard our ports.<\/p>\n
Smuggling will always exist while we are forced to prop up
\nindustries, creating a margin between the price of a commodity in
\nour domestic market and in the outside world. We cannot bring
\ndown the prices of our commodities without rejuvenation of
\nindustries, and this clearly is not a task that can be completed
\novernight.<\/p>\n
What is most essential is that the world of business and
\ngovernment work together as closely as possible.<\/p>\n
The writer was the Minister of Trade and Industry under the
\nMegawati government which ended its term on Tuesday.<\/p>",
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