Fair competition vital for future survival: Expert
Fair competition vital for future survival: Expert
JAKARTA (JP): Fair competition and more incentives at home
will enhance the competitiveness of Indonesia's manufactured
products overseas, an expert said yesterday.
Speaking at the Prasetiya Mulya School of Management's
graduation ceremony, Thee Kian Wie criticized the government's
failure to design a comprehensive policy ensuring fair
competition.
Thee, a senior researcher at the government-sanctioned
Indonesian Science Institute, said the absence has created
difficulties and distortions in many sectors.
The distortions include the creation of cartels, price
controls, controlled entry and exit of firms, exclusive
licensing, the domination of state-owned companies and ad hoc
government interferences, all of which benefit certain groups of
companies.
"As a result of these constraints, many sectors and industries
in Indonesia are controlled by monopolies and oligopolies," Thee
said.
According to Farrukh Iqbal of the World Bank, food processing,
paper, chemical, metal and non-metal mineral industries in
Indonesia have a high concentration ratio, compared to an
international standard. The same industrial sectors also are not
very export oriented.
Protection
Thee said tough domestic competition would push local
manufacturing firms to become more competitive by mastering
technology. Artificial barriers to domestic competition, he said,
will do little to improve their competitiveness.
In addition to ensuring fair competition, the government
should also provide a neutral trade regime by dismantling the
protection given to import-substitution industries, Thee
suggested.
Such protection turns the companies' focus inward and not
toward overseas markets.
International competition, he said, will force the companies
to reduce their production costs, improve the quality of their
products and designs, create new products and introduce new
technology for greater efficiency, Thee said.
"The necessity for Indonesia to improve the competitiveness of
its manufacturing sector through industrial technology capability
is getting more urgent because the exports of its traditional
industrial products are facing difficulties in developed
countries," Thee said.
Two of Indonesia's main export products, textiles and plywood,
have experienced serious declines during the past few years.
According to the Central Bureau of Statistics, plywood exports
dropped by 11.95 percent last year to US$3.7 billion from $4.2
billion in 1993. In the first seven months of this year, plywood
exports fell again by 14.15 percent to $1.98 billion from $2.3
billion in the same period of last year.
Textile exports plunged by 6.2 percent last year to $5.8
billion from $6.2 billion in the previous year. Textile exports
improved a bit this year, increasing by 1.45 percent to $3.4
billion during the first seven months from $3.3 billion in the
same period of last year.
According to a study on the technological capability of
Indonesia's textile, garment and electronic industries, conducted
by Thee and Mari Pangestu last year, Indonesia's textile and
garment firms lost their competitive edge due to their dependence
on imported technology, mainly from Japan.
"Their dependence on Japanese companies has reduced incentives
for them to become more independent firms by developing their own
technological capabilities," Thee said at the graduation
ceremony.
On hand at yesterday's ceremony were tycoons Sudono Salim and
Sofyan Wanandi, former forestry minister Hasjrul Harahap,
political analyst Harry Tjan Silalahi and president of Prasetiya
Mulya institute Djisman S. Simandjuntak.
Thee also warned that improving competitiveness did not mean
allocating more resources to the development of expensive high-
tech industries like the aircraft industry. (rid)