Service sector needs serious attention: Marzuki

Service sector needs serious attention: Marzuki

JAKARTA (JP): Facing the 21st century, Indonesia should modify
its service sector to create more employment and reduce the
country's huge deficits in the sector, an expert said here
yesterday.

Marzuki Usman, chairman of the Indonesian Economists
Association, told a seminar organized by Jakarta-based Pancasila
University that Indonesia is being challenged to protect and
nurture its service industry, while at the same time join
multilateral efforts to liberalize the sector.

"The first challenge is how to create an economic
transformation process... especially from an agricultural-based
production structure to industrial-based, and eventually a
service-based structure," he said.

Marzuki, who is also an expert assistant to the minister of
finance, noted that the service sector has helped improve the
welfare of Indonesians through employment opportunities in the
sector.

He said that in 1991, 31 percent of Indonesia's workforce
earned a living from the service sector. In urban areas, the
percentage was much higher, and almost equal to that in developed
countries. In the United States, 71 percent of the workforce
worked in the service sector in 1991.

In terms of Indonesia's current account, the service sector
has been blamed for the continuing and widening account deficits,
which reached almost US$7 billion in the 1995/1996 fiscal year.
In the service sector alone, Indonesia suffered more than a $10
billion deficit.

Indonesia has so far covered its current account deficit
mostly with funds from capital inflows, including those from
offshore loans, foreign direct investment and portfolio
investment.

State Minister of National Development Planning Ginandjar
Kartasasmita warned at the seminar that Indonesia will no longer
be entitled to soft loans from multilateral lending institutions,
considering it will be categorreed as a newly industrialized
country.

Therefore, Ginandjar said, the most important tasks for the
country are how to boost exports to earn more foreign exchange
and reduce its deficits, especially in services.

Marzuki noted that the main short-term challenge for the
government is how to create a services-liberalization policy
package which can reduce the country's deficits in the service
sector.

"The problem then becomes more complex when we are confronted
with a free trade tendency, including that in the service
sector," Marzuki said.

Multilateral efforts toward free trade in services is
currently pursued through the General Agreement on Trade in
Services (GATS), negotiations of which are underway.

As negotiations on trade in services are underway and
relatively new, compared with those on trade in goods, Indonesia
can still protect its service industry.

In GATS, Indonesia is so far committed to liberalizing -- to a
certain extent -- a number of services in five subsectors:
telecommunications, industrial services, tourism, financial
services and transportation.

Developed countries, which have reached an advanced stage in
the service sector, have been pressuring developing countries,
including Indonesia, to give more commitments.

"As our service sector is still weak, considering our huge
deficit in the sector, the existence of GATS serves as a warning
to our service industry," Marzuki said.

The next challenge for the country is how to produce high-
quality service workers as the competitiveness of the service
industry lies mostly on human resources, he added.

Supporting Marzuki's view, Indonesian Engineers Association
Chairman Arifin Panigoro noted that Indonesia needs to create and
empower local professionals to compete with foreign professionals
who dominate various service subsectors.

"The empowerment of our professional society is a key factor
to improve our national competitiveness," Arifin told the
seminar.

He noted that to create and empower qualified professionals,
the country needs to further nurture and create more universities
and other high education institutions, research and development
centers, high-tech information centers and professional
communication forums. (rid)