'If our neighbors take our market, where is our pride?

The Jakarta Post, Jakarta

Local electronics producers claim that 50 percent of the electronic goods traded in Indonesia are illegally brought into the country. This situation has hampered domestic growth and discouraged new investment. The Indonesian Chamber of Commerce and Industry's (Kadin) vice chairman for industry, technology and maritime affairs, Rachmat Gobel discussed the situation in a recent meeting with The Jakarta Post. The following are excerpts of his presentation:

In view of our domestic market potential, we must be able to establish a strong electronics industry, which not only produces end products but also components.

As a matter of fact, the component industry is supporting not only electronics, but also the automotive sector, which also needs electronic parts.

The development of both industries would also encourage the development of the plastics industry, which contributes a lot to the making of electronic and automotive products.

In short, these industries are interconnected, but the most important of all is that they are all labor-intensive.

With 220 million people, our domestic market is big enough to support the development of the electronics industry, not to mention the regional and international markets.

Electronic goods are the country's second largest non-oil and gas exports after textiles and garments. Their exports reached US$7.05 billion last year.

However, the figure is a drop in the bucket compared to the exports from the Philippines and Thailand. Electronics exports from each of those countries reached at least $25 billion last year.

Indonesia could emulate them by establishing a strong base in the 'low-tech' electronic sector with the domestic market as the main support. The industry will first supply the domestic market, before exporting their products.

Consumer electronic products such as conventional color televisions, refrigerators, air conditioners and washing machines are now considered low tech electronics.

However, the growth of the local low-tech industry has been hampered by the rampant smuggling of electronic goods, as 50 percent of the electronics traded in the country are smuggled products.

Without domestic market support, it is difficult for us to develop a strong low tech industry, let alone moving to the "high-tech" sector.

The Indonesian Chamber of Commerce and Industry (Kadin) has submitted to the government a roadmap describing all problems confronting the local industries -- problems that the government needs to immediately solve in order to boost the private sector and to attract fresh investment, which is badly needed to create jobs.

Among the problems are the rampant smuggling, unfavorable tax policies, unattractive labor laws and the lack of infrastructure.

If the government is able to implement 50 percent of the recommendations spelled out in the roadmap, I believe there will be fresh investment of up to $2 billion in the electronics industry alone within the next five years.

The next step that the government needs to take is to formulate its "target, vision and mission" for the domestic electronics sector for the next five years, and the next 10 years.

The government needs to formulate a five-year plan for itself, and the 10-year program for us to anticipate the ongoing liberalization under the World Trade Organization.

Without a broad overall understanding of where our industry is heading, our domestic market will be easy pickings for our neighboring countries.

If that happens, we will lose our national pride.

A similar situation also occurs in other industries, such as the tourism, or our own batik industry.

Take for example, Malaysia; the new Prime Minister (Abdullah Badawi) and his wife want to register a patent for Malaysian Batik.

If Malaysia succeeds in registering a patent for the word "batik", we might have to pay royalties to Malaysia when we export our own homemade batik.

Recently, a tourism association leader told me that they had to request the Japanese government's permission to use the song "Bengawan Solo" in a tourism advertisement. The patent for the song is held by Japan.

I've heard a similar story concerning our jamu (herbal drink) industry.

The jamu industry was an original Indonesian industry. We have an exclusive intellectual property right over jamu, which we have inherited from our ancestors for centuries. However, one of our neighboring countries apparently has a better plan to develop the industry.

I heard that Malaysia had planned to hold a convention on jamu, but fortunately, Indonesian associations rejected the idea due to worries that Malaysia might want to own the patent rights on all jamu.

When Brunei talks about jamu, it always mentions Malaysia rather than Indonesia, whereas we all know where jamu actually comes from.

Both batik and jamu, as well as other traditional Indonesian industries absorb a huge number of workers. Sadly, however, we are still unable to protect the intellectual property rights of our traditional industries.

If we can't protect and develop these, how can we protect and develop the electronics and automotive sectors, how can we shift to the 'middle-tech' level of electronics?

This is our main concern for the next five to 10 years.

We must move fast, both the private sector and the government must work together to build the vision of where we want to go.

We have to set a target on how to get at least closer to the Thais and Filipinos -- electronics exports of $25 billion -- which is nearly four times more than our current export income.

I do believe that we could get close to those two countries.

The electronics industry will naturally grow, even if the government does nothing. However, if the government implements Kadin's roadmap, we are optimistic we can grow two to three times faster.

Besides, the nation also needs to form a blueprint for the development of local industries through 2010.

I believe we should prioritize natural resource-based industries, in view of our strong base of natural resources and large population.

If we succeed, we will become a strong nation.

However, we have first to solve the smuggling problem.

The encouraging news is that soon after President Susilo Bambang Yudhoyono declared smuggling as the top concern of his administration, illegally imported goods started to pile up in ports.

This is a good example of how we can stop smuggling if we have the will.

Domestic demand for major consumer electronic products (in 000 unit)

1999 2000 2001 2002 2003

Color TVs 737 2,000 2,400 2,520 2,650

Refrigerators 547 920 1,170 1,590 1,720

Air Conditioners 85 173 270 370 520

Washing Machines 96 179 240 350 400

Source: Electronic Marketers Club