|
Policy in the sector of manufacturing industry and trade as the 1999-2004 Guidelines of State Policy underlines is aimed at: developing popular economy based on market mechanism, fair competition, and non-monopolistic practices; establishing a global-oriented economy by building competitive edge based on comparative superiority of being a maritime and agrarian state; empowering small-and medium-scale enterprises (SMEs) by improving the mastering of science and technology; and promoting bilateral and multilateral economic cooperation in the framework of augmenting exports.
Bontang NGL plant, East Kalimantan |
Pursuant to Law No.25 of 2000, development of manufacturing industry and trade stresses on the establishment of micro, small, medium and cooperative undertakings, on the improvement of domestic products' competitive edge, and on the prevention and control of environments from any destruction and pollution.
In refurbishing the real sector in a short term in a bid to recover economy from crisis the Government has introduced industrial and trade revitalization scheme, focusing on: revitalization of various industrial branches; development of various industrial branches; rearrangement of industrial structure; advancement of industrial technology; and development of supporting industries.
This sector has in fact played a key and strategic role either in underpinning economic growth and improving productivity of the people engaged in or in creating job and business opportunities, in bringing in and saving foreign exchange, boosting regional developments, and improving the people's earnings as well as in alleviating poverty.
The world's economic order has been undergoing a more rapid and fundamental change due to mainly more widespread economic globalization practices and fast development of technology. In one aspect the fast technological advancement has been offering substantial benefits, but in another aspect it has caused impairment for a country to compete when the country is heavily relying on comparative superiority based on natural resources and abundant but unskilled labor.
The shorter time cycle of a product indicates the faster technological development, many technologies being out of date. In the meantime the availability of natural resources in term of sorts, quantity and quality become rare and dwindle. This situation would make human resources becoming more-determining factor than other resources. This means that to have improved competitive edge and industrial competitive superiority based on skillful and creative human resources, technological and managerial capabilities is unquestionably-a prerequisite.
The main aims of improving the country's competitive edge are to augment foreign exchange from non-oil-and-gas exports, including from tourism industry, and to strengthen the country's economic viability. Short term measures having been taken to achieve the aims include maximizing the installed capacity of manufacturing industries by minimizing inefficiency of domestic and overseas trade, and by improving trade funding. Middle-term measures cover the strengthening of market institutions, and development of manufacturing industries having competitive edge based on comparative superiority which is underpinned by the advancement of science ad technology.
The period of 2000-2004 saw a less-than-optimum increased utilization of installed industrial production capacity. In 2000 the utilization of installed production capacity of manufacturing industries was about 61.7 percent. It grew to 65.3 percent in 2003. Of chemical, agro-and forestry industrial group the production capacity in 2003 was recorded at 75.5 percent, or growing on an annual average of 1.9 percent during the last four years; and of metal, machinery, electronics and multifarious industrial group was 55.2 percent or increasing on an average of 0.4 percent per annum.
MANUFACTURING INDUSTRY
Manufacturing industry has been for the past ten years playing a prime mover of the country's economy by contributing the biggest share to the gross domestic products (GDP). For instance in 2002 this sector accounted for some 25.01 percent of the total GDP, compared to 17.47 percent of agriculture. In 2000 the share of manufacturing industry to the country's GDP was making up some 24.9 percent, and in 2003 24.7 percent. At the same time that of agriculture was 17.2 percent in 2000 and decreasing to 16.6 percent in 2003. Other sectors accounted for 57.9 percent in 2000 and for 58.8 percent in 2003.
Manufacturing industry is classified into four major groups i.e. large-, medium-, and small-scale industrial groups in addition to cottage or household industrial group. This classification is based on the number of workers employed without taking machineries of production used or capitals invested into account.
The number of large-and medium-scale industrial establishments in the whole indicated a decreasing tendency from 21,146 in 2002 to 21,126 in 2003 or a decrease of 0.1 percent. But individually the number of publication, printing and recording industrial group, rubber and plastic industrial processing group and motorized vehicles assembling group added by 56 establishments, 50 establishments, and 54 establishments respectively.
Those large- and medium-scale establishments altogether employed 4,364,869 workers in 2002 or a decrease of 0.5 percent from that of previous year. Expenses for those employees by those establishments in 2002 totaled Rp46 trillion or a decline of 12 percent from those of 2001, or an average of Rp10.6 million per worker per annum. The number of workers employed by large and medium industrial establishments was expected to increase quite high in 2002. So were their expenses for workers.
In 2002 the largest decrease of expenses for workers in large and medium industrial establishments was suffered by food and beverage industrial sub-sector, namely about Rp 5 trillion. The highest formation of fixed capitals occurred in machinery and its accessories industry, amounting to Rp5 trillion. Investment of fixed capitals at sub-sectors of leather and leather goods industry, and of metal goods, except of machinery, suffered a decrease of almost 50 percent.
Outputs of large and medium industrial establishments in 2002 recorded a rise of more than 30 percent to reach Rp882 trillion. The increase, however, required 26 percent additional expenses of input. At the same time, on constant market prices, the values of products made by the establishments grew at more than 21 percent to reach Rp 811 trillion. The increase was followed by the rise of raw materials by 23 percent or amounting to Rp 468 trillion.
Of the total production value in 2002, the sub-sector of food and beverages accounted for the biggest proportion of 15.53 percent, and growing to an estimated 16.98 percent in 2003. The sub-sector also earned from its products added value as much as Rp 40.5 trillion in 2000 and the figure was expected to reach Rp46.5 trillion in 2003. Wholly, the total added value of large and medium scale industrial establishments in 2002 noted a rise of 16.28 percent.
Dominating the country's industrial structure has been cottage industrial establishments, accounting for 91.26 percent. In 2002, small-scale and cottage industrial establishments added by 3.41 percent and 7.91 percent respectively compared to those of 2001. The number of employees absorbed by small-scale industrial establishments noted an increase of 0.37 percent, and cottage establishments 10.34 percent. By the increase, small-scale establishments were assumed to absorb a 4.42 percent additional workers, and cottage establishments 1.65 percent.
Output of small-scale establishments in 2002 swelled by 20.67 percent from that of 2002 or as much as Rp 7,155.7 billion, and that of cottage establishments by 21.29 percent. For 2003, output of small-scale establishments was expected to grow by 6.54 percent or as much as Rp2, 733.3 billion, and that of cottage 1.83 percent or as much as Rp720.8 billion.
Parallel with the increase of output value, the cost of input borne by small-scale establishments raised by 23.47 percent and cottage establishments by 27.69 percent. Added value of cottage industries in 2002 also noted a rise of 13.64 percent and an estimated rise of 13.64 percent in 2003. That of small-scale grew at 15.40 percent of Rp1, 850.4 billion in 2002, and an estimated 9.51 percent in 2003.
Promotion of Small- and Medium-Scale Industries
Development policy of small- and medium-scale industries puts priority on the promotion of small- and medium-scale industrial establishments at outer Java, particularly at rather isolated and remote areas, areas along borderlines with some neighboring countries and at the countries eastern part; empowerment of entrepreneurs of the industries and their institutions; betterment of business climate; improvement of prime services in term of management, system and supporting facilities; development of innovative and realistic schemes meeting all market players in real sector.
Banana processing middle-scale industry. Banana is basic raw material for pasta |
Development vision of small- and medium-scale industries (SMIs) is oriented to approach the year 2020 for the creation of people's economy-based SMIs that play a significant role as important mover for manufacturing industries in a whole. The main aims of the development of SMIs are the formation of modern and viable SMIs that can offer job and business opportunities as well as better income for SMIs entrepreneurs in a more equitable fashion; the formation of more viable and stronger industrial structure; greater number of technology-based SMIs; improvement of exported products made by SMIs.
By type, there are SMIs engaged in the industries of foodstuffs, in clothes, chemicals of construction materials, metal and electronics, as well as handicraft. Gross domestic product (GDP) of SMIs engaged in foodstuffs had amounted to Rp 9.740 trillion in 1998 before shrinking to Rp8.908 trillion in 2001. At the same time that of SMIs dealing in clothes augmented from more than Rp3.473 trillion in 1998 to more than Rp 5.808 trillion in 2001; of SMIs undertaking in chemicals of construction materials rose slightly from Rp12.123 trillion to Rp12.592 trillion, that of metal and electronics grew from Rp4.969 trillion to Rp5.741 trillion, and that of SMIs in handicrafts increased from Rp2.516 trillion to Rp4.207 trillion.
Production value of SMIs in foodstuffs based on 1993 constant prices suffered a decrease from Rp 31.793 trillion in 1998 to Rp 27.5589 trillion in 2001. At the same time that of SMIs in clothes swelled from Rp 9.548 trillion to Rp15.994 trillion; of SMIs in chemical of construction materials shrank slightly from Rp28.746 trillion to Rp 28.720 trillion; of SMIs in metal and electronics undertakings swelled from Rp11.711 trillion to Rp15.473 trillion; and that of SMIs in handicrafts undertakings rose from Rp 5.777 to Rp.7.114 trillion.
DOMESTIC TRADE
Trade sector has been playing a substantial role in the country's economy. It supports greatly the distribution of goods and services, meets the needs of people for staple foods, and promotes stability of appropriate prices. Trade activities are intertwining and inter-supporting with other sectors of production such as agriculture, manufacturing industry, mining, finance, transport and communications. Its practices embrace sheer areas to include inter-insular migration resettlements areas, areas at or along borderlines, and even rather isolated and remote areas, thanks to the availabilities of facilities of trading.
Loading and unloading activities at Bom Baru riverport in Riau |
Development of domestic trade is very much related to the population growth rate, change of population age composition, distribution of population (that tends to the occurrence of urbanization), improvement and distribution of income, technological advancement, and change of the people's needs, tastes and life style following the betterment of their living standards.
Trade sector has served a substantial share in economic development as it is proved by the establishment of more viable trading system, the creation of relatively stable prices, the formation of job and business opportunities and trade facilities, and the development of exports as well as imports.
Retail business as part of the trade sector has been also featuring a heartening development in recent years. It was booming in 1996 or before the monetary crisis hitting the country. To encourage the business in 1999 the Government lifted the retail business from the investment negative list, allowing big foreign retailing players such as Sogo, Macro, Carrefour and Giant, to say some, to operate in Indonesia. How ever, in protecting local retailing players and traditional markets, the Government limits their operations to major towns or they are not allowed to operate at district or municipal towns. In 2002 alone there were 100 convenience stores, 802 supermarkets, including mini-markets, and 37 hypermarkets.
FOREIGN TRADE
Overseas trade plays a key role in marketing oil and gas as well as non-oil and gas commodities. Some kinds of the country's products have proved themselves successful in competing in and gaining international market to bring in large amount of foreign exchange. In one hand in fact the country's export commodities destinations have been expanding, but on another hand large proportion of those exported commodities is still concentrating to several countries, and though sorts of non-oil and gas commodities have been growing more varied only some have export basis.
By the improvement of competitive edge of the country's non-oil and gas export commodities at international marketit is marked by the augment of exports in term of volume and valueand the betterment of non-oil and gas export structure as well as expansion of their market, it is expected that Indonesia would turn to be a leading and viable trade state.
During the period of 2000-2003 non-oil and-gas exports grew at an average of 5.67 percentfar in fact below the target of 11.9 percent. Non-oil and gas export value in 2000 reached US47.76 billion, before decreasing to US$45.1 billion in 2001, and swelling again to US$47.4 billion in 2002. The target was not attained due to chiefly the global economic slowdown as a direct effect of the September 11 tragedy, and tighter competition as well as some domestic unfavorable conditions such as high cost in getting documents of export and import, labor disputes, insufficient infrastructures and facilities to help boosting investment in export-oriented manufacturing industries, and the rampant illegal trade and smuggling practices.
In encouraging non-oil and gas exports in 2001 necessary measures were taken including the reduction of export tariff of some commodities and the improvement of textile quota management system. In this context market expansion to countries of non-quota has been carried out through various activities including selling missions, trade exhibitions, and trade diplomacy as well as the operation of overseas trade promotional offices in six cities (one each in Osaka, Los Angeles, Dubai, Budapest, Johannesburg, and Sao Paulo). For domestic market, centers for trade promotion have been established in Surabaya, Makassar, and Medan. A similar center is planned to be established at Banjarmasin.
Exports of oil and gas from 2001 to 2003 grew at an annual average rate of 1.2 percent. During the first five months of 2004 Indonesian crude oil price was averaging at US$33.3. The increase trend of oil in world market caused unfortunately trade balance deficit to Indonesia for the Indonesian oil export value was below its oil import value. Indonesia still records trade balance surplus when export value of gas was counted in.
The country's sluggish economy has affected the import of non-oil and gas commodities. It plunged by 15.8 percent in 2001 before regaining by 0.1 percent in 2002 and 9.4 percent in 2003. At the same time, imports of oil dropped substantially by 17.5 percent in 2002 and 17.4 percent in 2003 due to mainly high degree of oil prices and domestic needs.
|
