Death of a hi-tech dream

Death of a hi-tech dream

It is mind-boggling to comprehend why the government has
waited so long to restructure the technically-bankrupt PT
Dirgantara Indonesia aerospace company. This dream of
leapfrogging to the hi-tech aircraft manufacturing that B. J.
Habibie had so stubbornly promoted since the mid 1970s against
the opposition of all sensible economists, died with the 1997
economic crisis.

The government only wasted time and made Dirgantara's
restructuring much more politically difficult and greatly
costlier now by trying to salvage the state company in 1998
without first realigning it into a more-focused industry.

Whatever the government will soon decide in a second bid to
salvage the white elephant, it should not try to revive the dream
of developing a national aircraft manufacturing industry,
otherwise it would disastrously repeat the billion dollar mistake
made by B. J. Habibie and his mentor Soeharto between 1976 and
early 1997.

We have been opposed to the aircraft manufacturing project
right from the outset when Habibie set out his dream that a
developing country with a per capita income of less than US$700
could make a hi-tech leap into the global aerospace industry.

Only the gush of taxpayers' money into the project that was
allowed by then authoritarian president Soeharto enabled the
white elephant to survive for 27 years, even with big losses
every year.

It has been and is still our main point of argument that it is
entirely economically unfeasible for such a poorly developed
country like Indonesia to be competitive in such a hi-tech
industry that exacts a high economies of scale and high loaded
costs (research, designing etc).

First of all, the national image of a country counts greatly
for the marketing of such a hi-tech product as aircraft. However
brilliant might have been the marketing promotion conducted for
Dirgantara aircraft, foreign buyers would have never believed
that Indonesia, whose government is perceived to be one of the
most corrupt in the world, was able to make an airplane.

Moreover, the degree of safety awareness in a developing
country like Indonesia is still too low to enable its aircraft to
gain international certification. Also heavily damaging to the
viability of the aerospace company is the complete absence of
supporting industries for aircraft. Like vehicle makers, aircraft
makers around the world depend largely on outhouse suppliers for
parts and components. But Dirgantara tried to do it by itself,
operating like an island in West Java.

Also vitally lacking is financing capability. A poor county
like Indonesia simply cannot afford to provide export or buyer's
credit, which is a prerequisite for the successful marketing of
aircraft everywhere in the world.

Just see how difficult it had been for Dirgantara to sell its
CN-235 turboprop plane. It did sell a number of the planes but
most of them were sold either through counter-trade deals or with
the assistance of its Spanish joint venture partner
Construcciones Aeronauticas (CASA) or were forced into the
throats of domestic airline companies and the military. Anyway,
many of them are now grounded due to a lack of spare parts or for
inefficiency.

Having said all that, we don't mean to suggest that Dirgantara
should be liquidated entirely. The government should salvage the
jewel parts of the company, notably its sophisticated equipment
and the large pool of its highly-skilled employees, foreign-
educated engineers, and mold them into commercially viable
divisions of parts and components manufacturing, engine-
maintenance center and engineering services for precision machine
tools.

Obviously, employment retrenchment is unavoidable. The whole
Cabinet should be united in their stance with regard to the
future of the company. A politically populist program is entirely
out of question, despite the already explosive level of
unemployment. A restructured, more-focused Dirgantara simply
cannot operate with such a bloated workforce of more than 9,500.

We still believe that if the divisions of Dirgantara are well-
managed and highly-competitive they could eventually be split off
into independent companies to attract new investors.