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.