Championing local products

Championing local products

President Soeharto's call last week for people to show
national spirit by preferring domestic products over foreign ones
may sound like an old, strange song to affluent consumers,
especially in the current era of economic globalization. But
Soeharto's appeal to the general public to make the promotion of
domestic products a national drive is not only relevant, but is
even more essential now to help the domestic manufacturing
industry improve their competitiveness in an open, global market.

The President rightly argues that many local products already
compare well with imported goods, and are even better in some
cases, in quality and price. His viewpoint is supported by the
steady growth of Indonesia's industrial exports, such as
textiles, garments, electronics, footwear, machinery and a wide
variety of other goods. As labor-intensive, light industries face
keener competition from countries which offer cheaper labor,
domestic manufacturers are being forced to produce higher value-
added products such as machinery, equipment and appliances to
remain competitive. This restructuring process, at least in an
initial stage, would not run smoothly without direct government
assistance and intervention.

The industrial complex of the Texmaco Group in Karawang, West
Java, where Soeharto renewed his campaign for a higher sense of
appreciation of domestic products, could not have been a better
showcase of how advanced our manufacturing capability has become.

The purified terephthalic acid (PTA) plant he dedicated had
been built mostly by Texmaco technicians. Most of the machinery
and equipment of the sophisticated, high-tech chemical factory
were also fabricated at the same complex. The President saw
himself Texmaco's capability to manufacture a wide range of
machinery, including weaving and textile processing machines with
computerized operating systems, computerized numerical control
lathes and various other equipment and machinery for chemical and
cement factories. In fact, the Texmaco industrial complex is the
first heavy engineering and fabrication enterprise in Southeast
Asia to use titanium as a raw material.

However, verbal appeal, even if directly by the President, is
only a small element of the ongoing campaign needed to promote
domestic goods. An environment should be created that would make
domestic products more appealing to individuals and industrial
consumers. In the late 1970s and early 1980s, the cabinet
included a junior minister who was made especially in charge of
championing local products. The President's office also had an
interministerial team to make sure that government procurements
favored local products. Both institutional instruments no longer
exist. Likewise, the high tariff and non-tariff protection given
to the domestic industry have been sharply decreased as part of
an economic reform measure to cope with the economic
globalization process.

Obviously, domestic manufacturers can no longer expect
government protection, as such a measure is ineffective in the
long run. Neither is it in conformity with Indonesia's commitment
to the global trade system under the World Trade Organization.

But the President reiterated that government procurements
should be better managed to ensure that they favor domestic
products. This is a good sign, because it is the government that
should lead the campaign in showing people that domestic products
are not inferior to foreign ones.

The promotion of domestic products, notably capital goods such
as machinery and equipment, not only becomes more urgent now, but
is also essential in supporting further development of
manufacturers, who have invested a great deal in acquiring
technology and expertise to produce such modern machinery and
equipment. Manufacturers themselves should obviously do their
part in promoting their products, especially in boosting users'
confidence in the quality and reliability of their goods.

The marketing campaign conducted by manufacturers and
preferential treatment given by the government is not sufficient.
Credit financing is especially crucial for the marketing of big-
ticket items such as capital goods. Here, we think the
government, through the central bank and state banks, could play
a greater role in enabling manufacturers of high-quality
machinery and equipment to provide credit to buyers. Without
long-term, low-interest loans, it would be extremely difficult
for domestic manufacturers, already burdened with high domestic
interest rates, to compete with foreign suppliers.