The key to reviving the country's manufacturing sector lies in efforts to increase competitiveness and to increase the added value of Indonesia's top products, a minister says.
"The main weakness affecting Indonesian industry is a lack of competitiveness. This will have to be dealt with first if we are to boost exports and support economic growth," Minister of Industry Fahmi Idris said Wednesday.
Speaking at the official opening of Senada -- a USAID-funded program aimed at increasing industrial competitiveness -- Fahmi said that it was also necessary to improve the image of Indonesia as an investment location on the international stage.
According to a 2006 report from World Bank's private-sector arm, the International Finance Corporation (IFC), Indonesia is ranked 115 out of 155 countries in terms of providing a conducive business climate. The report said that Indonesia lags behind other South East Asian countries -- except Timor Leste and Laos.
In terms of global competitiveness, according to a survey last year by the World Economic Forum (WEF), the country is ranked 69 out of 104 countries, slightly above Sri Lanka, the Philippines, Bangladesh and most African countries.
The Indonesian Competitiveness Program (Senada), Fahmi added, could help local industry develop their added value and produce goods that could compete with those produced by emerging industrial countries like China, Vietnam and India.
Supported by funding of US$200 million, Senada is a four-year program that will help manufacturing companies increase their productivity through the setting up of Regional Competitiveness Centers (RCC).
"The RCCs will be set up first in Jakarta, Bandung and Surabaya, and will bring the stakeholders together to remove specific regulatory barriers," Senada project director Ronald Ashkin said.
Participating firms would also be provided with technical support to adopt international manufacturing best practices so as to increase productivity and market access, he said.
"After a year, we will evaluate the improvements made in sales revenue, trade and productivity levels," Ashkin added.
The program will focus this year on helping medium- to large-scale firms operating in the automotive components, information and telecommunications technology, and textile sectors. All domestic private sector manufacturing companies in these areas with annual revenue of between $50,000 and $10 million are eligible to participate in the program.
Fahmi hoped the program would also provide support for labor-intensive small and micro enterprises.
"We hope that the program can help us reach our 8.6 growth target for the manufacturing sector this year and provide a half million more jobs annually," he said.
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