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.