Coronavirus and National Industry

KOMPAS/TATANG MULYANA SINAGA

Workers head home on Thursday (23/4/2020) after finishing their shifts at a garment factory in Dayeuhkolot, Bandung regency, West Java. Protecting workers from Covid-19 infection is critical as a number of businesses continue to operate during the large-scale social restrictions (PSBB) implemented in Greater Bandung.

The Covid-19 pandemic is causing a kind of stuttering on the part of governments and the public as they try to find the best way to manage it in countries around the world, including Indonesia.

Even countries with an established level of economic and technological progress, supported by a good health system, stuttered at the beginning of mitigating this non-natural disaster. The standard mitigation system that has long been in place seems to have lost its relevance, so the government seems to have responded slowly with trial-and-error policies in managing the entry of the pandemic to Indonesia.

This condition was exacerbated by the politicization of the pandemic, a limited health system, and a neglectful attitude towards science and technology. On the other hand, the Covid-19 epidemic in Indonesia has given rise to extraordinary community solidarity in working together to help each other overcome the crisis. This assures us that the Indonesian nation has strong social capital that will always rise up when the nation encounters a common problem. The creativity and innovation of the nation\'s children have emerged, forced by the Covid-19 emergency. Various university-led creative products have appeared in collaboration with businesses and governments, such as emergency ventilators, rapid diagnostic test kits, Covid-19 caregiving robots, swab collection booths, face shields, portable sinks, air purification devices, and virus transport media (VTM) for polymerase chain reaction (PCR) tests.

Also read : Indonesia to Mitigate Covid-19 Outbreak’s Economic Effects

President Joko “Jokowi” Widodo has launched several domestic innovations produced by the Covid-19 Research and Innovation Consortium during a teleconference on 20 May 2020, in conjunction with the National Awakening Day. This is very happy and encouraging news.

There are still many components for equipment and raw materials for medicines that still need to be imported. In fact, the government has launched a program to accelerate the development of the pharmaceutical and medical equipment industries as outlined in Presidential Decree No. 6/2016, as well as an action plan to develop the pharmaceutical and medical industries as outlined in Health Minister Decree (Permenkes) No. 17/2017. The goal is to develop independent pharmaceutical and medical industries by 2025. These plans are an extraordinary opportunity as a blessing in disguise from the Covid-19 pandemic.

Also read : Understanding Economic Phenomenon during the COVID-19 Outbreak

Kompas/Bahana Patria Gupta

Simple and Low Cost Prototype Mechanical Ventilator made by the Sepuluh November Technology Institute at the ITS Robotics Building, Surabaya, East Java, Tuesday (7/4/2020).

Looking back at the national industry

Sudaryono (2013) explained that [Clifford] Geertz disclosed in his notes that Java possessed the same capacity in manufacturing technology during the colonial plantation or forced cultivation system (1870) as Japan did in 1869 in the early years of the Meiji Restoration (1868-1870). However, in its subsequent development, Japan was able to more than double its production capacity to 2.5 times the production capacity in Java. Japan leaped ahead during the Meiji Restoration to leave Java behind. In contrast, Java showed the opposite.

In the 60 years following the early 1930s, as the agricultural sector grew rapidly and access to information and capital in rural areas grew, businesses began to emerge, develop and strengthen in Indonesia. Businesses of the nation\'s children strengthened during this era, marked by the rapid development of manufacturing hubs for specific products and industries, such as handwoven textiles, umbrellas, furniture, batik, rattan, leather, the metal casting industry, roofing tiles, ceramics, steel building materials, and the confectionery industry (Sudaryono, 2013). This data shows that we once had strong technological and industrial capabilities. However, our industry seems weak at present and we have become a nation that imports its various needs.

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Indonesia imports 90 percent of its medical supplies, 95 percent of its pharmaceutical raw materials, 53 percent of its petrochemical raw materials, as well as electronic components, agricultural products, and various other materials. This condition is inseparable from the path of the development paradigm since the National Long-Term Development I, which relied on the wealth of Indonesia\'s natural resources. At that time, the development focus was on the abundance of natural resources and cheap labor in Indonesia. The late Prof. B.J. Habibie, who served as State Minister for Research and Technology and concurrently as the Agency for the Assessment and Application of Technology (BPPT) head, made efforts to shift the development focus to human resource development to gain competence in science and technology and the development of strategic industries.

Beginning in 1980, many young smart and talented Indonesians were sent to study abroad with an aim to gain mastery in science and technology, just like Japan did in 1872 during its education reform program under the Meiji Emperor, following his declaration that scientific knowledge must be pursued to all corners of the world. In 1989, the Indonesian government formed the Strategic Industry Management Agency (BPIS) to oversee 10 state-owned enterprises related to advanced technology, heavy equipment and defense. The IPTN and INKA were the most prominent among these. But unfortunately, just as the effort began to produce results and the nation\'s strategic industries began to grow and develop, the monetary crisis arrived and forced President Soeharto to sign a letter of intent (LoI) with the IMF in early 1998, which led to the dissolution of the BPIS.

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AFP/NICOLAS ASFOURI

(FILES) In this file photo taken on April 29, 2020, an engineer looks at monkey kidney cells as he makes a test on an experimental vaccine for the COVID-19 coronavirus inside the Cells Culture Room laboratory at the Sinovac Biotech facilities in Beijing.

Becoming a productive country

There is no other choice for Indonesia but to become a productive country by developing various sectors, of which is industry is but one. The peak of Indonesia\'s demographic bonus between 2020 and 2024 must be maximized as much as possible for this purpose. This period is a strategic opportunity for Indonesia to accelerate economic development, one of which is to industrialize by capitalizing on the abundance of productive-age human resources. Failure to take advantage of this brief opportunity could be disastrous, putting Indonesia – currently in the group of middle-low income countries – at risk of being caught in the middle-income trap. At the peak of this demographic bonus, the number of job seekers will grow every year and if job availability does not grow in line with demand, there will be less beneficial social problems.

We must find the right strategy to accelerate progress, just like other nations that have been able to move faster in achieving national progress. In the 1960s, South Korea was still classed among the poorest agrarian countries in the world and had no natural resources. According to Time magazine, South Korea in the 1960s was poorer than Iraq, Liberia or Zimbabwe. However, in two to three decades, the country torn apart by civil war turned into a new and prosperous industrial nation. In 1983, South Korea had a GDP of US$87.02 billion and was starting to surpass Indonesia’s $81.05 billion GDP, and then it took off, leaving Indonesia in the dust. In 2018, South Korea\'s GDP was $1.619 trillion and ranked 12th in the world, while Indonesia\'s GDP was $1.042 trillion.

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South Korea was able to leap ahead from being a poor country to becoming a prosperous country in a relatively short time because of the innovation and hard work of all elements of the nation. To accelerate Indonesia\'s progress, we must work harder, continue to innovate, and change the national development focus so it no longer relies on natural resources, but on advanced technology supported by skilled and qualified human resources.

In the current era, natural resources are no longer an adequate measure of a country’s progress and competitiveness. We must turn to the power of science, technology and the arts, as well as creativity and innovation, which have proven to be the driving force of progress in a number of countries in the world. Human development is the most strategic investment that Indonesia can make in order to create a smart workforce that has a mastery of science, technology and the arts, that possesses the high creativity and innovation to become a productive and competitive nation.

Various strategies

We cannot rely on voluntary technology transfers from other countries to achieve industrial progress, because technological mastery is the competitive edge needed to win the competition. A country that has already made progress is unlikely to transfer its key technologies to other countries that might become strong competitors. A country will only share obsolete, unprofitable and unattractive technologies to other countries, along with factory relocation, if the destination country wants to accept it.

South Korean economist Ha-Joon Chang illustrates very well in Kicking Away the Ladder: Development Strategy in Historical Perspective the extent of the fierce competition between developed and competitive countries (Mugasejati and Pratikno, 2013). Developed countries deliberately kick down the ladders they have climbed so that their competitors do not use them. Therefore, in order to ascend faster, we must make our own ladder of a better quality, even an escalator or elevator to surpass the progress of other nations.

Japan was the first non-Western country to successfully transfer technology in a structured manner at the beginning of the Meiji Restoration, when it bought industrial machines and equipment. At the same time, it brought in Western experts to teach Japanese children how to operate the equipment. Later, Japan modified and internalized the technology of Western countries to give rise to the emergence of Japanese technology in the late 19th century. South Korea began developing its own industrial technology in the early 1960s in three stages: the duplication imitation stage, the creative imitation stage, and lastly, the innovation stage. What Japan and South Korea have done in achieving technology for the advancement of their countries is similar to the 3N concept of Ki Hadjar Dewantara in education: niteni (recognize), nirokke (imitate), and namabi (add to/develop).

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The strategy to seek technological mastery to pursue industrialization for creating high-quality products is very important in order to increase the country’s competitiveness. Creating high-quality products to compete in the global market must be carried out through focused and innovative research to develop a prototype, which can then be developed further into a leading product in the world. Research towards this goal is not easy, because it requires large funding and the process of turning prototypes into superior products carries a high risk of failure (Satryo Soemantri Brojonegoro, Kompas, 14/4).

However, in order to develop the national industry, the scheme must proceed by building strong cooperation between the government, universities/academics, industry/business, the media, and the public using the pentahelix model. The government primarily fills the role in policy direction, regulatory flexibility, and funding. Universities and research institutions fill the role in terms of ideas, implementation, and innovative research. Industry determines the research topics for their industrial needs together with universities and research institutions, as well as funding research. And the media promotes the scheme and raises public pride in the products of the nation\'s children.

To ensure the supply of raw materials and intermediate materials for national industries, development must be synchronized with upstream, intermediate and downstream businesses. Production must be strengthened at upstream and intermediate businesses to provide raw materials for downstream businesses. The demand for methanol, for example, currently cannot be fully met by domestic production. As an intermediate compound, methanol is very important because it is the raw material for producing a variety of chemicals, including acetic acid, formaldehyde, methyl tertiary butyl ether (MTBE), and dimethyl ether (DME).

The government must take strategic steps to recover the national economy and protect MSMEs.

Methanol is also a reactant in manufacturing biodiesels, which uses methanol to cause reactions with a variety of vegetable oils (one of which is palm oil) and animal oils in the esterification and transesterification processes. Various chemicals for the food industry, such as sodium bicarbonate, lecithin, and benzoate, are also still imported. The materials that have been produced domestically for the food industry are only MSG and yeast. However, imports are still necessary because of the large demand. In order to support the growth of the metals, machines and electronics industries, developing the base metal industry must be prioritized.

The industry with the greatest potential that must be developed in a serious manner to boost economic growth, increase export value, and sustain the supply chains of large industries, is the MSME industry. MSMEs have an important place in the national economy because of their large number and their contribution to employment and GDP. MSMEs have also proven to be a safety valve during the economic crisis in Indonesia. The Covid-19 epidemic has affected a decline in the growth of the national economy. GDP growth in the first quarter of 2020 was just 2.97 percent. This condition has had a profound effect on MSMEs, with a decline in demand in the domestic market due to the decline in buying power and demand for exports.

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The government must take strategic steps to recover the national economy and protect MSMEs. MSMEs with superior export products must continue to be supported in order to grow, and MSMEs with the capability to manufacture large products for the national supply chain should be fostered and given the space to play an active role in supporting large businesses according to their capabilities. Meanwhile, large businesses/companies must take on the role of adoptive fathers to advance MSMEs.

KOMPAS/NINO CITRA ANUGRAHANTO

Panut Mulyono

The preexisting conditions of Indonesian industry must be resisted and challenged to achieve progress and independence. In Industry 4.0, Indonesia should advance not only in various marketing and service management systems, but also in manufacturing and other technology-intensive industries. Covid-19 has made Indonesia aware that it can.

Panut Mulyono, Rector, Gadjah Mada University.