'If you do not have the equipment, you cannot compete'

'If you do not have the equipment, you cannot compete'

Global producers of machine tools and metalworking machines
wrapped up on Saturday their first international exhibition
displaying state-of-the-art technology in Kemayoran, Jakarta. The
Jakarta Post's Zakki P. Hakim talked to co-organizer Southeast
Asian's Machine Tool Club (MTC)'s chairman Antoine Coletta, vice
chairman George Lim and honorary secretary Uwe Vogel about the
prospects of the Indonesian manufacturing sector. Following are
excerpts:

Question: What is your aim for this event?
Antoine Coletta (AC): Through the International Metalworking
Technology and Machine Tools Exhibition 2005, we are trying to
bring high technology into the market here.

Indonesia spends a lot of money in importing molds and dies
from Taiwan, Korea, Japan and Europe, because there are no
manufacturers that can make them here.

Our aim is to transfer some know-how in order to build local
molds and dies. But to do this you need reasonable good machines
and technology.
What is the current situation of manufacturing here, do you think
as some people say, the sector is on the brink of a renaissance?
George Lim (GL): Judging from the economic data, also from the
traffic jams you have, I believe your economy is certainly
improving. I'd give it four or five years before I would look for
results, though.

Moreover, if you look at the total machinery imports, you
import more machines than Malaysia. You have an automotive
sector, you make more than 3 million motorcycles every year. And
also you have a cost advantage. You have people with skills and
many good technical schools in the country.

With the concept of and Asian Free Trade Agreement (AFTA)
opening up markets, I believe your products can sell in other
ASEAN countries. Competition is now not just about Indonesia, it
is about other ASEAN countries, competing with China and Korea.

However, you don't have the right equipment, you cannot
compete.
Local industry players say:"Why should I buy an expensive
European machine that lasts for a life-time, while I can buy
cheaper Chinese machines with lower quality and replace them
every 10 years when new technology emerges?
Uwe Vogel (UV): That argument is not a good one. Because buying a
more expensive machine means it has a higher productivity and
precision and has features that low-end machines don't have.

Somebody who comes into a shop with the argument,"cheap is
enough for me" will not be able to compete on the world market.

Today, it's not about where products are being made, today
it's about which company has the quality to be successful at the
international level. People don't ask where it is manufactured.
Today, people ask by who is the product manufactured, what is the
quality and what are its benefits.
GL: We have a lot of high-end machines. You may be surprised, but
today we see companies in Indonesia, the Philippines, Vietnam and
China spending a lot of money on good equipment because they want
to compete on the world market.

If you want to capture the local low-end market, you can
capture it with the cheap machines. But then you cannot capture a
much bigger market outside of Indonesia, where expectations about
quality and delivery are far higher.

You're not playing football with somebody around here, but
with world class performers. In that league, people expect a lot.
Which ASEAN country is the most advanced in the manufacturing
sector? Or dares to invest in high-end machinery?
GL: If we look at the automotive industry, Thailand is more
advanced. In Malaysia it is semi-conductor industry. If you look
in Indonesia it doesn't have anything that specific.

To compete Indonesia should come up with something (to focus
on). The driving force for the manufacturing sector here is the
automotive industry.

You have to find way to increase automotive production here,
as it involve a lot of industries such as stamping, machine,
rubber, transportation and management. But because of the
political conditions in the past, people are not investing in the
sector. You need to spend some money here.
Do you think Indonesia needs to come up with an industrial
blueprint?
GL: You have to come up with one. I am not sure what your
government is trying to do. It is too early to tell.

For example, Thailand is a few years ahead in some
manufacturing sectors. They solved their monetary crisis quicker.
But things are moving here, your physical statistics are getting
better, your president is an outgoing person. If your security
situation could be controlled, I believe more and more people
would be willing to invest here.
UV: You can use Thailand as an example. They have a stable
government, they have fought corruption and crime, they have also
been subject to international criticism, but for industry what
they have done was quite good and they have a lot of
infrastructure projects.
GL: Infrastructure is very important. After years, a Jakarta to
Bandung highway has just opened. You should have a highway all
the way to Surabaya, then the industry will flow.
Indonesia is addressing its shortcomings but will that be enough
to convince people without a clear blueprint?"
GL: They will come. All the businesspeople I've met said they
will come. You have a large population. If you asked many people
why they go to China, they will tell you reasons, but certainly
cost-saving is not one of them.

I don't think it is cheaper to produce in China nowadays. But
(they are there for) the huge market. Same here. You have a huge
market here, they will come.
UV: Everybody said that China has a big population and low labor
costs but Indonesia is definitely cheaper compared to the eastern
parts of China.

One obstacle to setting up business is what people say is a
rigid labor law here, which prevents people from investing. I
think Indonesia has to overcome its bureaucratic obstacles and it
will have a bright future.