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)