Industrialization plan needed: Economists

Industrialization plan needed: Economists

JAKARTA (JP): Economists suggested yesterday that the
government draft industrialization plans and seriously develop
sectors with long-term competitiveness to become major foreign
exchange earners.

Rizal Ramli, an economist at the Econit advisory group, told
the House of Representatives' information and foreign affairs
commission that the government currently has no clear or proper
industrialization policy.

"The industrialization policy now is identical with a personal
hobby. When someone (in the power) likes planes, for instance,
the policy is then directed toward developing planes," Rizal told
the commission.

He noted that Indonesia successfully laid down a
industrialization base during its first 25-year development plan,
which ended in 1994.

Now, Rizal said, it is time for Indonesia to fortify its
industrial structure by producing capital goods and raw materials
for its manufacturing industry.

"We are now in the critical junction of our industrialization
process. Unfortunately we don't have the right industrialization
policy to guide our industrialization process," Rizal noted.

He said there is actually a method to formulate such an
industrialization policy in accordance with the strengths and
weaknesses of a specific country. Countries like Japan, South
Korea and Singapore have used such a method to develop their own
industrialization policies.

With such an industrialization policy, Rizal said, the
government will have clear direction to develop industrial
sectors, so that it will not select incorrect alternatives in
developing specific sectors.

"If we take the wrong alternatives, the cost will be very
expensive. If the government cannot bear it, it will transfer the
cost to the private sector which will eventually burden customers
with it," Rizal said.

Supporting Rizal's argument, Dorodjatun Kuntjoro-Jakti, an
economist at University of Indonesia, suggested that the
government does not make a trial policy because it could cost
more than expected.

"In this era of globalization, we should not be ashamed to
develop our agroindustry, like plantations, to target the world's
seven billion consumers in the next century," Dorodjatun told the
commission.

Competitiveness

Concurring with Dorodjatun's view, Rizal suggested that the
government seriously develop sectors which have long-term
competitiveness, like plantations, forestry, tourism and
unskilled labor.

"Our plantations: chocolate, palm oil, rubber, tea, coffee --
you name it -- will remain competitive in the next 15 years
because we are a tropical country with vast acreage and
relatively low labor costs," Rizal said.

"Our main competitor, Malaysia, can not compete with us
because their labor costs are already high. Currently they can
compete with us because our workers go there to support it," he
continued.

Meanwhile, Rizal said, Indonesia's agricultural products for
human consumption such as rice, soybean, poultry, fruit and the
like cannot and will not bear competition due to high structural
costs.

"It needs rethinking by all of us so that the cost structure
of our people-agricultural produce can be reduced. We might need
an action plan to protect millions of our farmers," Rizal said.

In the forestry sector, Rizal said, if the government is able
to maintain the rate of deforestation with the sustainability of
its forests, Indonesia's forestry industry will remain
competitive in the long run.

"I'm proud of our forestry minister who has tried his best to
ensure that our forests are managed in a sustainable manner,"
Rizal said.

In services, Rizal said Indonesia has competitive advantages
in tourism and unskilled labor, but not in other sectors.

"However, we might face difficulties in exporting our laborers
in future because industrialized countries reject the idea of
liberalizing labor services," Rizal said.

"That's unfair because they vigorously propose the
liberalization of skilled labor services but reject the
liberalization of unskilled labor services," he continued.

He suggested that the government pursue free trade not for the
sake of free trade but for the sake of fair trade and national
interests.

To face such free trade, Dorodjatun hailed the government's
efforts in liberalizing the country's economy through a number of
deregulation measures. He also hailed the government's efforts in
privatizing state firms in order to make them more efficient.

"Such a privatization drive, however, shall not be limited to
state firms only. It shall also cover family-owned companies
which tend to be closed to shareholders," Dorodjatun said.

He contended that if state firms and family-owned firms were
privatized through initial public offerings on stock exchanges it
would help boost the competitiveness of the country's economy.
(rid)