Competitiveness Absolutely Must Improve

Kompas/Priyombodo

A view of the SCBD integrated business district, Jakarta, Wednesday (8/2). The Asian Development Bank expressed confidence that the Indonesian economy in 2017 would grow 5.1 percent with successful implementation of economic policies, which would affect growth.

JAKARTA, KOMPAS -- Enhancing national competitiveness should be priority homework for the government to promote growth in the manufacturing industry. The primary focus should be on the improvement of human resource quality, which would normally be a long-term matter. Deregulation through the issuance of economic policy packages alone is not enough to solve this problem.

According to the 2016-2017 Global Competitiveness Index released by the World Economic Forum, Indonesia\'s ranking dropped from 37th to 41st position, although its score remained the same at 4.52.

A number of countries have passed Indonesia as they have been able to make improvements more rapidly. As for the Ease of Doing Business Index released by the World Bank, Indonesia\'s ranking had risen from 106th position to 91st.

"We should have a policy on priority industries. And we do already have one,” Coordinating Economic Minister Darmin Nasution told Kompas in Jakarta on Wednesday.

A number of discussions with the Industry Ministry have taken place. The Industry Ministry has already taken a number of measures. "The industry should not only grow above that of GDP but also should be higher. This is necessary because the industrial sector absorbs a large amount of labor compared to other sectors. We need the manufacturing industry," Darmin said.

For this reason, the government should promote national competitiveness. It is about the quality of human resources. "People have to believe and competitiveness is determined by the quality of human resources. It is a question of convincing investors that we have advantages and are competitive in a number of areas," he said.

Separately, Finance Minister Sri Mulyani Indrawati said many things could and must be done in terms of tax incentives, such as tax allowances and tax holidays, to promote the manufacturing industry.

The same thing goes with customs. A number of incentives have been provided, such as a policy establishing a bonded logistics center in special economic zones so that business people in the manufacturing industry will have certainty and at the same time be more competitive.

Infrastructure

Meanwhile, in terms of cost, Sri Mulyani said the government would continue to improve efficiencies in line with the government\'s policy to accelerate infrastructure development and deregulation. "We will see the progress of what the government has implemented and see how effective it is," Sri Mulyani added.

The manufacturing industry has been a major contributor to Indonesia’s gross domestic product (GDP) since the New Order era. However, since the 1997 financial crisis, its contribution has gradually declined. However, the manufacturing industry is still a major contributor to GDP even today.

The manufacturing sector’s contribution reached its peak during the oil boom in 1973-1981. At that time, manufacturing grew at an average of 13 percent per year, far above the country’s average annual economic growth of 7.6 percent in that period.

Correspondingly, the economic structure has changed. In 1967, the manufacturing industry accounted for only 7.5 percent of GDP. At the same time, agriculture was the largest contributor with a contribution of 53.9 percent of GDP. In 1997, the manufacturing industry accounted for 26.8 percent of GDP, while agriculture had fallen to 16.1 percent.

Meanwhile, chair of the Indonesian Employers Association (Apindo), Hariyadi B Sukamdani, said a lot of work had to be done to support the industry in Indonesia. The same spirit should also come from all relevant stakeholders to ensure that the Indonesian economy had higher added value.

"This must be done so that we are not left behind. Investments are rising, but they have yet to bring prosperity because they are mostly capital intensive," Hariyadi said.

Business climate

Manufacturing industry growth needs to be supported by a favorable economic climate. So far, a number of institutions have projected that Indonesia\'s economy in 2017 will be better than that of the previous year. Economic growth in 2017 is projected to rise to 5.1 percent, up from 5.02 percent in 2016.

Indonesia\'s economy this year will be supported by the banking sector through higher lending growth. CIMB Niaga, for example, is targeting growth in mortgages reaching 8-10 percent this year, while the credit card business is forecast to grow 10-15 percent.

Director of consumer banking at CIMB Niaga, Lani Darmawan, said this year credit card growth was still expected to reach 10-15 percent. Mortgages were expected to grow 8-10 percent.

Meanwhile, PT Bank Central Asia Tbk (BCA) is targeting growth in mortgages of 12-13 percent this year. Credit growth in general is expected to increase by 10.1 percent.

BCA president John Setiaatmadja said mortgages were expected to rise in line with increased growth in the property sector.

(LAS/AHA/CAS/WIE/JOE/ARN)