RI faces competition from Asian countries

JAKARTA (JP): A report from the United Nations Industrial Development Organization (UNIDO) said the Indonesian manufacturing sector was facing increased competition from other Asian countries, despite the brisk performance of its exports.

Asif Hasnain, the UNIDO representative to Indonesia, said on Wednesday that despite strong overall export performance, Indonesia was very dependent on imported production components.

"It is absolutely imperative that Indonesia take steps now to improve its international competitiveness in the manufacturing sector," he said at a media conference, which also was attended by the vice chairman of the Indonesian Chamber of Commerce and Industry, Fadel Muhammad.

Shafiq Dhanani, team leader of the UNIDO/UNDP project that produced the report, said the declining competitiveness was a result of the emergence of new competition for the labor- intensive exports that Indonesia had dominated, and competition on the domestic market from lower-cost producers like China and India.

He said that to regain competitiveness and reduce costs it was essential for Indonesian manufacturers to produce more components locally and cost-effectively.

"Even before the crisis, Indonesian manufacturers were beginning to face a more difficult environment due to globalization," Dhanani said.

Indonesia's competitiveness in textiles, garments and footwear declined in the second half of the 1990s compared to other countries in the Southeast and South Asian regions, Hasnain said.

Following the 1997 financial crisis, the drastic devaluation of the rupiah did not succeed in stimulating non-oil manufactured exports, Hasnain said.

"The now much lower labor costs in dollar terms have also failed to restore Indonesia's competitiveness," he added.

Hasnain called for the Indonesian manufacturing sector to adopt a seven-point transformation agenda, supported by a white paper on competitiveness in manufacturing. (tnt)