Bappenas to help set strategy for manufacturing sector

Zakki P. Hakim, The Jakarta Post, Jakarta

The Ministry of Industry, together with the National Development Planning Agency (Bappenas), planned to set up a national strategy for the revival of the ailing manufacturing sector, a senior official said.

New Minister of Industry Andung A. Nitimihardja said that the plan was discussed during the first Cabinet meeting of the new government of President Susilo Bambang Yudhoyono on Friday.

"We will set the strategy together with Bappenas," Andung told reporters.

He added that part of the strategy would be on how to push banks to lend more money to the manufacturing sector.

The country's manufacturers have fallen on rough times since the late 1997 financial crisis marked by a five-fold drop in the local currency and a surge in domestic interest rates during the early period of the crisis. That, in turn, inflated their dollar and rupiah-based debts, sending some of them into bankruptcy, while others had to scale down their businesses and lay off employees.

But as the country starts to recover from the crisis, most banks remain reluctant to lend badly needed funds to the manufacturing sector due to the lingering risks amid slow progress in debt restructuring. This has created difficulties for the manufacturers, who need to obtain working capital to replace aging machinery, a condition which has made them less efficient and uncompetitive against more efficient manufacturers, particularly those from China, both in the domestic and overseas markets.

The poor investment climate in the country has further worsened the situation.

Observers have said that since the financial crisis, the government has failed to come up with a clear strategy to revive the troubled sector.

Andung said that his office would review the blueprint prepared by the previous minister of industry and trade Rini MS Soewandi, and if possible, adopt part of the strategy.

Rini's strategy consisted of mid-term and long-term development plans for various manufacturers including textile and textile products, electronics, automotive, components, communication technology equipment and machinery.

The development plans were divided into two timeframes. The first one is from 2005 to 2009, while the longer term strategy is for 2010 until 2020.

Furthermore, Andung said that he would require at least a week before deciding on the programs, after intensive talks with his senior officials and other related ministers.

Starting on Monday, the minister and his staff will have an office at a building previously called the ministry of industry and trade on Jl. Gatot Subroto, South Jakarta. While Minister of Trade Mari E. Pangestu will move into an office on Jl. Ridwan Rais in Central Jakarta. Under previous governments, the two ministries were merged into one, the ministry of industry and trade, which had two office buildings.