Govt plans to force local companies to compete globally

Govt plans to force local companies to compete globally

By Riyadi

MENDOZA, Argentina (JP): Indonesian Minister of Industry and
Trade Tunky Ariwibowo promised Friday to reduce protection levels
in the domestic market to force local companies to compete with
foreign firms both at home and internationally.

"The problem with our companies is that they are very much
intoxicated by our large (protected) domestic market," Tunky told
journalists aboard an aircraft flying him from Mendoza to Buenos
Aires.

The minister went to Mendoza, some 1,000 kilometers west of
Buenos Aires, to visit the IMPSA industrial estate. IMPSA is one
of the world's leading producers of capital goods, especially
power turbines.

Tunky acknowledged that although some 50 percent of
Indonesia's tariff lines are already in the zero to 5 percent
bracket, some other industries are still so well protected that
companies working in the protected areas are uncompetitive.

"There is no other way to force them to go global except by
reducing the protection level (in the domestic market) through
tariff reductions," Tunky added without elaborating what the
protected sectors are.

Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie, who accompanied Tunky on his visit to Mendoza,
supported the minister's argument, saying Indonesian businessmen
are so domestic market-oriented that they are reluctant to
compete in export markets.

"If we remain like this, we will continue to be left behind by
our neighbors, especially Malaysia and Thailand," Aburizal said,
adding that both neighboring countries entered the "forgotten"
markets of Africa and Latin America many years ago.

Malaysia, through the Malaysia Air System, has opened direct
flights from Kuala Lumpur to Johannesburg and Buenos Aires. It
has invested in cattle breeding here. It has also won a contract
to build a toll road in Buenos Aires. It has even expanded its
trading wing to Uruguay, by building a trading house there.

Aburizal called on Indonesian businesspeople to continue
seeking business opportunities in non-traditional markets,
especially in Latin America, eastern Europe, the Middle East and
Africa, to open ways for Indonesia's exports.

"Investing abroad should not be considered as capital flight
anymore but rather a way to open foreign markets for Indonesia
exports," Aburizal said.

Tunky also called on Indonesian exporters to look into
possibilities of exporting their products to non-traditional
markets because Indonesia's traditional markets have become
increasingly saturated with its traditional export goods such as
textiles and textile-related products, wood products, leather
goods, footwear and electronics.

"Our traditional markets have been Japan, the United States
and Europe. But I think you should not forget the markets of
developing countries in Latin America, like Argentina, which also
have a high economic growth policy," Tunky said.

The minister is here leading an Indonesian economic mission to
Latin American countries, including Argentina, Brazil and Mexico,
to pave the way for Indonesian exporters to penetrate the market.
Yesterday, Tunky, accompanied by 40 businesspeople, left Buenos
Aires for Sao Paulo on a two-day mission to Brazil.

Capital goods

During his visit to Mendoza, Tunky met with the shareholders
and executives of IMPSA and played golf with them. Tunky said
that he had invited IMPSA executives to cooperate with Indonesian
firms to develop the capital goods industry in Indonesia.

He said Indonesia, whose economy is growing by more than 7
percent per annum, is a fertile market for capital goods. Almost
one third of Indonesia's imports are capital goods.

Indonesia, Tunky said, will continue opening its market for
capital goods to satisfy the growing domestic needs.

Aburizal said Argentina's advanced capital goods industry can
contribute to the development of the industry in Indonesia and
the other members of the Association of Southeast Asian Nations
(ASEAN) -- Brunei, Malaysia, the Philippines, Singapore, Thailand
and Vietnam.

Aburizal, also chairman of the ASEAN Chamber of Commerce and
Industry, said that the private sector from the ASEAN countries
are sounding out cooperation in the production of capital goods.

Tunky said the ASEAN governments, through the ASEAN economic
ministers meeting in Jakarta earlier this month, have supported
such cooperation in the production of capital goods.

He said the ASEAN governments' support will be in the form of
procurement because they remain the largest buyers of capital
goods in the region.