Two sectors not ready to compete
Two sectors not ready to compete
Zakki P. Hakim, The Jakarta Post, Jakarta
The government will continue supporting the country's
automotive and electronic industries after the Association of
Southeast Asian Nations (ASEAN) liberalize the sectors in 2007, a
senior official said on Friday.
Ministry of Industry and Trade's director general of metal,
machinery, electronics and miscellaneous industries Subagyo said
that Indonesia was not yet ready to compete with neighboring
countries in both sectors.
Indonesia is permitted to continue supporting both industries
after 2007 by benefiting the "exclusion list" facility.
"Liberalization will be postponed for products in the
exclusion list. This will give time for the industries to grow
stronger," said Subagyo, whose office supervises among others
electronics, automotive and textiles.
Automotive and electronic industries are among the 10
"priority sectors" which ASEAN agreed, in their meeting in
Jakarta last week, to be liberalized by 2007. The others are
agro-based, e-ASEAN (e-commerce), fisheries, healthcare, rubber-
based textiles and apparel, tourism, and wood-based industries.
The countries also agreed to set aside limited "sensitive"
products for later liberalization. Each country can only put into
the "sensitive list" an average of 15 percent of the total
products from all the 10 sectors, he said.
The 10 sectors have some 1,400 products, which are about 13
percent of the total 11,000 products traded in the region.
Despite the public's perception that the nation's textile
industry is now very weak, Subagyo said the government had no
intention to much support the industry, since it already had a
relatively strong structure from upstream to downstream.
The industry has been capable of engaging competition in the
world's market, let alone in Southeast Asia, said Subagyo.
"Thus, the sensitive list could be dominated by automotive
products," he said.
Expanding the industries would need new investment, but most
investors would be reluctant to do so in an open market
environment, he said.
"Without tariff barrier, the investors will be crushed by the
inflow of goods, before they can reach adequate capacity," he
said.
Currently, there are only 200 companies producing automotive
components in Indonesia, compared to 700 in Thailand, according
to Subagyo.
The government has targeted to boost the number of the
component companies so that 80 percent of the domestic demand can
be supplied by local producers in the next five years. It will
thus offer facilities, including tax incentives, to attract
investors into the sector.
Similarly, the government will also expand supporting
companies for the electronics industry, according to Subagyo.
Automotive and electronics are among Indonesia's top
manufactured goods exports, with a respective export value of
US$605 million and $7.36 billion last year.