Wed, 09 Mar 2005

RI manufactures lagging behind neighbors

Zakki P. Hakim, The Jakarta Post, Jakarta

Lack of investment in manpower skills, infrastructure and research and development in Indonesia's manufacturing industry over the past three decades have slowed down the country's industrialization process compared to its neighbors.

"Indonesia needs to address those issues better to have an improved performance," the United Nations Industrial Development Organization (UNIDO) director general Carlos Magarinos explained after a meeting on Tuesday with Minister of Industry Andung A. Nitimihardja.

A UNIDO chart showed that Indonesia's industrial performance was ranked 38th in 2000, up from 54th in 1990 and 75th in 1980. But the figure was lower than Malaysia's, ranked 15th in 2000, up from 40th in 1990; the Philippines, was 25th in 2000 and 42 1990; and Thailand, was 23rd in 2000 from 47 in 1990.

"The figures show that Indonesia is making some progress although at a much slower pace than its neighboring countries," Magarinos said.

UNIDO -- a UN agency with a purpose to boost the industrialization process in developing countries -- talked to the minister as part of efforts to speed up the reconstruction of tsunami-stricken Aceh and North Sumatra.

"We will be involved with the government on its priorities in reconstructing Aceh, particularly in reviving small and medium enterprises and the fisheries sector in the province," Magarinos said.

His visit was also aimed at developing business partnerships and the transfer of technology to the eastern parts of Indonesia and developing the private sector in post-conflict Maluku.

Magarinos said UNIDO supported the government's move to form clusters of priority industries, which include textile, food, palm oil, wood products, rubber and petrochemicals.

However, he said, UNIDO did not promote old-fashioned industrial policies where subsidies were given to encourage the growth of different sectors.

"On the contrary, we will promote modern industrial policy that is based on the mobilization of information, skills, knowledge and technology. That is the source of growth and capital accumulation," he said.

Andung said the government would adopt the new industrial policy but might still maintain subsidies for certain sectors in the form of tax incentives, particularly to encourage the private sector to invest more in research and development.

"We realize that the industrialization process needs to have several drivers of stronger human resources and research and development. We are starting to build industrial competitiveness through research and development," he said.

The government expects the manufacturing sector to grow by an average of 8.56 percent over the next five years, in order to allow the economy to expand by around 6.6 percent annually until 2010.

However, some commentators said that it was pointless to have such high growth if the local manufacturing sector continued producing the same goods in the next decade.

They claim that the country's manufacturing sector is stagnant because the same basic products have been made in the past 30 years, while neighboring countries have shifted to produce more sophisticated goods using higher technology.