It is now or never for Indonesia electronics industry

It is now or never for Indonesia electronics industry

Zakki P. Hakim, The Jakarta Post, Jakarta

Over the last three decades, major Asian countries have managed
to improve exports from basic manufacturing products to more
sophisticated goods, with one major exception -- Indonesia.

Aside from natural resource-based products, Indonesia's top
manufacturing exports still revolve around textiles, clothing and
footwear.

While China, South Korea, Malaysia, Thailand and the
Philippines have been shifting their exports to high-technology
products, this country has fallen by the wayside in the global
supply chain with respect to high-technology electronics parts
and components.

However, the production of electronic goods has been on the
increase and they were Indonesia's second-largest non-oil and gas
export last year, bringing in around US$7.6 billion to the
country. But the figure is still a mere 3 percent compared to the
estimated combined ASEAN total of $225 billion for the period.

Facing such a lucrative global electronics market -- with
current annual growth reaching 20 percent -- consumer electronics
manufacturers in the country have set a target to double their
exports to $15 billion during the next five years.

"Even if we managed to double the exports, the figure will
still be less than 10 percent of the current total regional
exports," said Rachmat Gobel, Indonesian Chamber of Commerce and
Industry (Kadin) vice chairman for industry, technology and
trade.

"But we have to start now. Otherwise, neighboring countries
like Thailand and even Vietnam are more than ready to take over
investment opportunities," said Rachmat, who is also chairman of
the Electronics Association (Gabel).

Speaking to The Jakarta Post, he said Indonesia as the fourth-
most populous country in the world had always been attractive to
investors and much of its current annual growth of 4 percent to 5
percent was due to domestic consumption.

Indonesians purchasing power per capita had also improved to
slightly over $1,000 last year from an average of $600 during
late-1990s economic crisis, he said.

While Indonesians remain poor compared to people in developed
countries, 33 million low-income families managed to annually buy
1.4 million simple radio cassette players, 4.5 million 14-inch
and 21-inch televisions, 3.7 million irons, 3.3 million fans and
1.9 million water pumps.

Some 23 million families from the middle to upper income
bracket have annually bought two million single-door
refrigerators and 1.7 million washing machines and air
conditioners.

The stronger consumer demand expected to accompany the
increased purchasing power, Rachmat said, would be more than
enough to support the development of a domestic electronics
industry and increase sales of locally produced goods in the
domestic market from Rp 9 trillion (US$971.4 million) to Rp 37
trillion during the next five years.

The numbers coincide with the expansion of locally produced
electronics from 54 percent of the domestic market share to 75
percent, according a document obtained by the Post -- Gabel's
Vision 2010 Electronics Industry Development Strategy in
Indonesia.

Rachmat said the industry needed fresh investment of up to
$1.48 billion to double exports and $596.16 million to multiply
production for the local market.

The investment, he said, should be prioritized for the
development of high technology and digital electronic products
such as automatic washing machines, bigger refrigerators and 29
inch televisions.

"By 2010, we have to have cell phones, digicam and flat screen
televisions including plasma and liquid crystal models, being
produced here," he said.

Major pre-conditions of attracting investment were to have a
strong support industry for the electronics sector, harmonized
industrial and product standards and competent human resources,
he said.

Minister of Trade Mari E. Pangestu has stressed that her
government wanted the country's electronics sector to grow in
line with the rest of East Asia.

However, the government did not include the sector in its top-
10 priority industries in recent planning. Mari told the Post
that the government would adjust the plan by having a trade,
investment and industrial strategy.

Rachmat said such a strategy was needed soon or the country
would "end up producing low-tech electronic goods forever."

He said that over centuries the world's industrial center had
moved from region to region, and today it was in East Asia with
China at its center.

"Opportunities like this do not even come twice in every 30
years. It is now or never," he said.