Electronics manufacturers see strong prospects for Indonesia

Electronics manufacturers see strong prospects for Indonesia

Adianto P Simamora, The Jakarta Post, Jakarta

The country's electronic goods manufacturers have started
producing digital electronic items even though demand is still
relatively low because they expect that consumer purchasing power
will soon recover in line with the improvement of macroeconomic
indicators.

Electronics companies are also now in tough competition to
bring their technology to Indonesia in anticipation of robust
demand for digital electronics in the near future.

In addition, they are also planning to make Indonesia their
production base for the regional market, which is now imposing
import tariffs of below five percent on electronic goods under
the Association of Southeast Asia Nations (ASEAN) free trade area
(AFTA) scheme.

Electronics executives Lee Kang Kyun of PT Samsung Electronic
Indonesia and Sung Kyun of LG Electronic Indonesia agreed that
demand for digital electronics would soon rise sharply in
Indonesia.

"I am optimistic enough to say demand will follow the latest
trends, in which people will soon move away from their old
electronics products to digital ones," Lee told The Jakarta Post
over the weekend.

He said that his headquarters in Korea had agreed to make
Indonesia a production base for high-tech products, which would
be exported to ASEAN countries and Australia.

Samsung currently markets digital electronic items, including
Digital Video Disk (DVD) players, projection TVs, plasma TVs and
LCD TVs.

Samsung has produced about one million DVD players since the
company set up a plant in January 2002 in Cibitung, West Java.

A year later in January 2003, Samsung brought its projection
TV technology to Indonesia. It produces some 1,500 TV sets every
month.

Starting in June, the company then produced plasma TVs from
its Cibitung plant. "We have so far produced 150 items," Lee,
Samsung's marketing director, said.

"We shall also market imported home theater products here,
starting this month, but we hope to produce such products here
soon," he said.

However, he declined to state the total value of Samsung's
investment here.

The company is expected to book US$300 million from domestic
sales in 2003, compared with last year's $170 million, while
export sales are predicted to increase to $850 million in 2003
from $800 million last year.

"Sales of digital products will still contribute about 20
percent to this year's total revenue," he said.

Meanwhile, LG Electronic said that the company would also
bring its technologies to Indonesia for the production of digital
electronic items.

"Digital products are the future of electronics. We have to
follow the trend," Sung, LG's marketing director told the Post.

He predicted people would move from Video Compact Disc (VCD)
players to DVD players this year as prices were expected to
continue falling.

"We hope to control some 20 percent of Indonesia's DVD market
this year," he added.

LG has produced slim-type DVD players priced at about Rp
800,000 per item since January 2003 at its Cibitung plant.

The company is expected to start producing projection TVs here
next month so that the company can reduce its prices.

"As of now, we still import both projection TVs and plasma TVs
from Korea," he said.

He said that the price of digital TVs was still high. Sixty-
inch plasma TVs, for example, were sold here at $18,000 per item.

LG predicted its sales would reach some $300 million this
year, as compared with $200 million in 2002.

Both companies admitted that their move to introduce high-tech
electronic products in Indonesia was a result of the government's
decision to cut luxury taxes on electronic products last January.

However, they still urged the government to provide a further
tax stimulus to encourage more electronic companies to invest in
the country.

"Luxury taxes of 10 percent to 40 percent on such digital
products are still high and we therefore hope the government can
reduce them," Lee said.

The giant electronic companies planned to set up manufacturing
plants here in the mid-1990s, hoping to benefit from the
country's cheap labor costs and huge market potential, but
shelved their plans due to an unfavorable tax climate and rampant
smuggling.

"This made Indonesia lag far behind other countries in the
digital electronics industry," Lee said.