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)