Non-oil export plan has hurdles
Non-oil export plan has hurdles
JAKARTA (JP): Reaching the non-oil export target of US$36.2 billion for the 1995-96 fiscal year, an increase of 16 percent from the current fiscal year, will be a serious challenge, Trade Minister Satrio B. Joedono said yesterday.
Joedono told a gathering with journalists that Indonesia is now facing keener competition from other suppliers of cheap products such as China, India and Vietnam.
"Those countries are able to sell products cheaper as their labor costs are lower than ours ," Joedono said.
He foresaw keener competition in such labor-intensive industries as textiles, garments, shoes, bicycles and plywood.
During the January-August period of last year, exports of textiles and garments declined by 8.8 percent to $3.84 billion, while a level of $7 billion was expected in 1994.
Plywood exports, the second largest foreign exchange earner, also declined around nine percent.
"There is no other way to win amidst fiercer competition except for reducing our costs through higher efficiency," Joedono suggested.
To help increase the competitiveness of Indonesian products, he promised that the government would introduce another package of deregulation measures this year to abolish "high costs outside the factory," including red tape and illegal levies.
"Deregulation in the trading sector this year will focus on the further simplification of procedures and licenses," he pointed out.
The minister said stronger economic recoveries in major developed countries will increase the international market demand for products from developing nations.
"But we don't expect higher prices due to keener international market competition. Indonesian exporters therefore should diversify into higher quality and higher value-added products to fetch higher prices," he said.
He said the government is encouraging businesses to develop marketing networks overseas by acquiring existing distribution networks in a bid to promote Indonesian products.
"Such an investment should not be seen as capital flight because it is meant to enlarge our market access," Joedono said.
Joedono also charted out Indonesia's challenge under the new multilateral trading arrangements outlined by APEC and the World Trade Organization.
"All of this requires us to adjust business conditions and trade competition here to that which prevails in other countries," he cautioned.
In preparation to meet those challenges, the government will submit two bills regarding unfair market competition and consumer protection to the House of Representatives sometime during the next fiscal year, Joedono added.
Replying to questions about the protection of domestic upstream industries, the minister explained that under new WTO rules, Indonesia, as a developing country, is still allowed to protect its industries with import tariffs of up to 40 percent.
But as to whether "we will use that opportunity or not will depend on the impact of such protection on our downstream industries," he argued.
Tariff protection has become the subject of heated debate during these last few months since PT Chandra Asri Petrochemical Center, the country's first olefin plant, asked for government protection of up to 40 percent tariffs against imports.
Commenting on cement prices, which rose steeply last year, Joedono hinted that domestic prices should be allowed to move within the international price range, otherwise investors will not be interested in building new cement plants.
Industry Minister Tunky Ariwobowo said recently that Indonesia would import five million tons of cement this year to cover the domestic deficit, caused by the wide gap between the demand and supply capacity.(rid)