RI agroindustry needs structural reform

RI agroindustry needs structural reform

JAKARTA (JP): Indonesia needs to structurally reform its agroindustry to improve its efficiency, a national conference was told yesterday.

The head of the Board for the Development of Agroindustry, Kaman Nainggolan, said that reform was needed in investment regulations and in monetary, marketing and manpower policies.

Without reform, Indonesia could face difficulties in competing with foreign producers, both in the domestic and overseas markets, he told a national conference of the association of experts in agroeconomy.

He said that investment regulations remain complicated despite a series of deregulation measures in the last five years.

In the monetary sector, the existing lending rates are also still too high, making the agroindustrial sector less attractive than other business fields, he said.

"It is, therefore, necessary for the government to introduce a special interest rate for agriculture-based industries," he said, citing that banks in several Asian countries offer lower lending rates to agricultural companies.

In Thailand, the lending rate for the agribusiness is set at an average of four percent per annum, a bit lower than the approximately six percent charged by Malaysian banks.

Unlike in those two countries, Indonesian investors in the agribusiness receive no special treatment from banks, which at present charge borrowers between 15 percent and 18 percent per annum.

"The high lending rates make the return on investment ratio in the agricultural sector much lower than those of other business fields," he said.

Nainggolan said that poor marketing and a lack of skilled workers also hamper activities in the agroindustry.

H.S. Dillon, another speaker at the two-day congress, which will end today, said the free trade pact implemented by the World Trade Organization early this year would become a threat rather than an opportunity for Indonesia if it fails to modernize its agroindustry.

"Indonesia's products will not be able to compete with those coming from other countries if their quality is not improved," he said of the impact of the fiercer competition resulting from the full implementation of the free trade pact in the next 10 years.

Dillon, an assistant of the minister of agriculture, shared the view on the need for reform in the agricultural sector to enable Indonesia's farm products to compete in the era of trade globalization.(hen)