Cable makers urged to improve quality

JAKARTA (JP): The Indonesian Electric Cable Manufacturers Association (APKABEL) believes upgrading quality of local cables is the only choice in ending the dominance of imported cables in the domestic market.

Association chairman Kusudiarso Hadinoto said over the weekend that many local cable manufacturers had difficulty selling their products at home as most orders from local buyers went to foreign cable makers.

The growth rate of imported cables averaged 16.5 percent annually over the past five years, while "most local producers cry over the lack of orders since 1995", Kusudiarso said.

The value of imported cables jumped by more than 35 percent to US$270.5 million in 1996 from $199.1 million in 1995.

According to the association, which has six optic-fiber cable plants among its 34 members, copper cable makers have currently lost much of their market as telecommunication companies replace copper cables with optic fiber cables.

For instance, between 20 percent and 30 percent of cables to be used by the state-owned telephone company Telkom in the next five-year development plan beginning 1999 will be optic fiber.

Indonesia's first cable plant was established in 1972. The industry made progress in the 1980s after the government instructed state-owned electricity company PLN and state-owned telephone company Perumtel (now Telkom) -- the main customers of cable producers -- to prioritize cables made in Indonesia.

To protect the local cable industry, the government imposed a high tariff rate of between 30 percent and 40 percent on imported cables, before reducing it to 15-20 percent, the current rate.

These protective measures have not been much help.

Kusudiarso said improving quality would be the only option to enable association members to compete with the foreign cable producers.

"In talking about competitiveness, local cable producers should use an international benchmark to enable them to compete," said Kusudiarso.

He said it was now the time for local cable manufacturers to consolidate and readjust their operation to the current trends, in which only good quality products would succeed.

Indonesia's cable production grew at 17.5 percent per year from 1992 to 1996. In the same period, the imported cables grew by 16.5 percent.

"Based on this data, we can conclude that the actual growth of domestic demand for cables far exceeds the growth of local production," Kusudiarso said.

Beginning this decade, Indonesia has exported cables to the United States, Australia, Japan and Europe, as well as developing countries such as Sri Lanka, Thailand and Iran.

He said Indonesia's cable exports grew an average of 49.5 percent over the past five years. Exports jumped to $143.1 million in value last year, from $72 million in 1995.

Despite the high export growth, Indonesia still suffers a deficit in its foreign cable trade.

According to the association data, Indonesia's cable trade deficit was $127.3 million in 1996, up from $126.9 million in 1995.

The cable trade deficit was worsened by the local cable industry's dependence on imports of raw material, he said, adding that it imported 35 percent of its raw material, worth Rp 572.6 billion ($224.5 million), in 1995.

Kusudiarso said the local cable industry would have to focus as much on the domestic market as on exports, and make their products as competitive as imports with the advent of the free market era. (jsk)