Government blasts for neglecting electronics sector

Government blasts for neglecting electronics sector

Zakki P. Hakim, The Jakarta Post, Jakarta

"The government has been neglecting the electronics industry,"
Adhi Sukmono, secretary of the Association of Indonesia
Electronic and Electrical Appliances Industries, said on
Wednesday during a discussion between industry players and
journalists.

The remarks immediately received the support of other
businessmen participating in the discussion, which was organized
by the Indonesian Chamber of Commerce and Industry (Kadin) and
the Electronics Association (Gabel).

Among the industry players were the top executives of major
brands such as Panasonic, Toshiba, LG Electronics, Cosmos and
Akari.

Adhi blamed lack of knowledge about the industry on the part
of government officials for the "negligence and resulting series
of misguided policies".

Kadin vice chairman for industry, technology and the marine,
Rachmat Gobel, said the latest government move that showed this
negligence was the omission of the electronics industry from its
top 10 priority industries under the country's five year plan
(RPJM).

Indonesia's electronics sector is the biggest non-oil and gas
sector after textiles and clothing, with last year's exports
amounting to approximately US$7.6 billion.

"It is important to have government commitment to an industry
and, eventually, the provision of incentives," said Rachmat.

He emphasized that the sector merited attention, considering
its export performance and labor intensive nature. "If we get the
incentives, we can double our exports to $15 billion in five
years."

The electronics makers urged the government to consider the
fact that it was more profitable to open a factory and produce
goods here rather than merely importing them.

"It is unfair that a brand that has no factory in the country
and relies solely on imports can gain a similar market share to
other brands that have made big investments," said Kadin's
Indonesia-Japan Economic Committee secretary-general Heru
Santoso.

Heru stressed that the government needed to consistently
provide tax relief for companies that invested in research and
development.

As an example, he said that an electronics maker in Malaysia
could have its total taxes halved if the firm, among other
things, invested in R&D, provided training, invested in property,
used environmental protection equipment or entered the export
market.

Moreover, Ali Soebronto Oentaryo, managing director of PT
Panggung (producer of local brand Akari), said local and foreign
investors were reluctant to set up shop here as importing raw
materials was much more expensive than importing the end product,
due mainly to the higher import duties imposed on key materials
such as steel.

He said that when the business climate encouraged firms to
import rather than produce, downstream industries would
eventually die and upstream supporting industries would follow
suit.

"Without strong supporting industries producing parts and
components, who will want to open a factory here," Ali said.

He added that it was imperative for the government to restrict
electronics imports.

"If the government can restrict the importation of drugs using
various safety and health standards, logically the same can be
applied to electronics imports," he said.

The industry players expressed concern about increasing
imports of cheaper electronics products, mostly from China, that
they said failed to meet health and safety standards.

According to PT Indonesia Epson Industry vice chairman Eiichi
Abe, contrary to the common perception, Indonesia actually
enjoyed the same level of competitiveness as China, especially as
regards labor.

However, Abe said the main distinguishing factors were that
China was far stronger in precision injection, molding processes,
engineering design and R&D, which was a result of the active
involvement of universities there.

"Aside from the universities' roles, China has numerous
exporting firms and strong supporting industries," he said.

Rachmat added that the Chinese government had a long-term and
detailed plan for the building up of its manufacturing sector,
including availing of technologies introduced to the country by
investors.

"For example, the Chinese government sent 5,000 workers to
work in one industrial cluster full of foreign factories. After a
certain period, it then moved the workers to various clusters of
domestic factories, to which they brought their newly acquired
skills," he said.

"Has our government thought about such a plan?" he asked.