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.