RI's industrialization faces serious obstacles

RI's industrialization faces serious obstacles

JAKARTA (JP): Indonesia's industrialization process is facing serious obstacles due to uncertainties in cost fluctuations, machine quality variations, delayed delivery time, poor after- sales services and lack of trained operators, an analyst said.

"The obstacles are rooted in the fact that more than 90 percent of machines and precision dies and molds are still being imported," Miranda S. Goeltom, a deputy assistant to the coordinating minister of economic and finance, said over the weekend.

Moreover, she said, the main input for machinery production, such as steel in a variety of grades, is not readily available in Indonesia and must be imported from wholesalers in Singapore.

Speaking at a seminar on Indonesia and the ASEAN Free Trade Area (AFTA), which was organized by the Indonesia Forum Foundation, Miranda said that Indonesia should develop its machinery industry to facilitate the industrialization process, so that it can gain much from the Afta agreement, due to be implemented in 2003.

"Indonesia can certainly gain much from Afta if it can increase its manufactured exports to the ASEAN region, especially technology and capital intensive goods such as electrical and electronic equipment and machinery," she said.

The Association of Southeast Asian Nations (ASEAN) groups Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

But, Miranda said, the problems of expensive research and development, high interest rates, lack of subcontracting links and good infrastructure, limited mastery in manufacturing technology, serious backwardness in product technology and poor quality of human resources have hampered the development of Indonesia's machinery industry.

He pointed out that expensive research and development has hampered the intention to develop design and engineering of machine tools and machinery products, so that Indonesian producers are still in the stage of learning and are inefficient.

"In fact, Indonesian producers cannot compete with China, India and Taiwan, which can usually offer cheaper and more reliable products," she said.

"Research and development and the ability to innovate are key factors in enhancing competitiveness in the machinery sector," she said.

Miranda said that lending interest rates of about 20 percent per annum have put producers in a difficult position to fund their industries.

"The lack of good infrastructure, such as roads and ports, make it difficult for the industry to meet the on-time delivery requirements of the multisourcing mode of procurement in the increasingly competitive market," she said. (13)