'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.