Potential exists for strong domestic industrial sector

Potential exists for strong domestic industrial sector

Rachmat Gobel, Jakarta

In recent years, there has been an exodus of international
companies from Indonesia. Kyocera is just one of the most recent
examples. Because of this exodus, and the reluctance of new
investment to come into Indonesia, many are claiming that
Indonesia is threatened by a "de-industrialization" process.

Yet, in view of our domestic market potential, Indonesia
should be able to establish a strong industrial base from which
to achieve sustainable development. Take for example the
electronics industry which I am most familiar with. A strong
electronics industry in Indonesia is very feasible, one that not
only produces end products but also electronic components.

The component industry supports not only electronics, but is
crucial in other industries as well, such as the automotive
sector, which also needs electronics parts.

The development of both the electronics and the automotive
sectors would also encourage the development of the plastics
industry, which contributes a lot to the making of electronic and
automotive products. These industries are interconnected. More
importantly, they are all labor intensive.

With 220 million people, our domestic market alone is big
enough to support the development of the electronics industry. In
addition, there is the huge potential of the regional and
international markets.

Electronic goods are the country's second largest non-oil and
gas exports after textiles and garments. Exports of electronics
reached US$7.05 billion in 2004. However, that is a drop in the
proverbial bucket compared to the exports from the Philippines
and Thailand. Electronics exports from each of those countries
reached at least $25 billion last year.

Indonesia could emulate them by establishing a strong base in
the "low-tech" electronics sector by first supplying the domestic
market as the main priority followed by exporting. "Low-tech"
electronics include conventional color televisions,
refrigerators, air conditioners and washing machines. Without
domestic market support, it would be difficult for us to develop
a strong low-tech industry, much less move into the high-tech
sectors.

However, many problems beset the industry, such as rampant
smuggling, unfavorable tax policies, unattractive labor laws and
the lack of infrastructure. These problems of course apply to
many other Indonesian industries.

The Indonesian Chamber of Commerce and Industry (Kadin) has
submitted to the government a road map describing all problems
confronting local industries -- problems that the government
needs to immediately solve in order to boost the private sector
and to attract the new investment badly needed to create jobs.

If the government is able to implement just 50 percent of the
recommendations spelled out in the roadmap, I believe there will
be fresh investment of up to $2 billion in the electronics
industry alone within the next five years.

The next step that the government needs to take is to
formulate its "target, vision and mission" for itself to
anticipate the ongoing liberalization under the World Trade
Organization. Without a broad overall understanding of where our
industries are heading, our domestic market will be easy pickings
for our neighboring countries. If that happens, we will lose our
national pride and perhaps even our national heritage.

Take for example, the threat facing our own batik industry.
Malaysia, under its new prime minister, Abdullah Badawi, wants to
register a patent for Malaysian batik. If it succeeds in
registering a patent for the word "batik," we may well have to
pay royalties to Malaysia when we export our own homemade batik.

To take another example, a tourism association leader told me
that they had to request the Japanese government's permission to
use the song Bengawan Solo in a tourism advertisement. The patent
for the song is held by Japan.

I have heard a similar story concerning our jamu (herbal
medicine) industry. The jamu industry is an original Indonesian
industry. We have, or should have, exclusive intellectual
property rights over jamu, which we have inherited from our
ancestors centuries ago. Yet here too we are facing a threat from
Malaysia which also wishes to develop a jamu industry. In fact,
when people from Brunei talk about jamu, they refer to Malaysia
rather than Indonesia.

Both batik and jamu, as well as other traditional Indonesian
industries absorb a huge number of workers. Sadly, however, we
seem unable to protect the intellectual property rights of our
traditional industries. If we cannot protect and develop these
industries, how can we protect and develop the electronics and
automotive sectors? How can we shift to the "middle-tech" level
of electronics, automotive and other industries?

This should be our main concern for the next five to 10 years.
And we need to move fast, with both the private sector and the
government working together to build the vision of where we want
to head toward.

The writer is a businessman and Kadin deputy chairman for
industry, technology, fishery and maritime affairs