Jakarta – Industry Ministry MS Hidayat expressed his concerns on Friday over the possibility that local manufacturers would lose out in trading goods when the ASEAN Economic Community [AEC] became effective in 2015.
He said the influx of goods from other ASEAN member countries would flood the domestic market in a desire to capitalize from the growing middle class, and local producers had only two years left to enhance their skills and capacity to meet the increased competition.
"The 2015 AEC will provide our nation with many opportunities but also challenges with such an expanded market for our industrial products," he said during an Indonesian Chamber of Commerce and Industry (Kadin) national meeting.
The national meeting focused on strengthening added value in local industries to edge out the imminent competition. "On the positive side, the AEC will attract foreign investment to Indonesia and provide joint venture opportunities to gain wider access to raw materials," Hidayat said.
He said Indonesia needed to learn from the implementation of the ASEAN-China Free Trade Area (ACFTA) in 2010. China's manufactured goods began flooding the Indonesian market in early 2010 at lower prices, beating similar products produced locally.
Citing the similarities of products manufactured by neighboring ASEAN members, he said Indonesia would likely have to compete in same-market segments.
"At the time [ACFTA began its implementation], local goods couldn't compete with those from [China], and we don't want that to happen again [when the AEC comes into effect]," said Hidayat, who led Kadin just two months before assuming his ministerial position in October 2009.
The AEC was created in 2003 to integrate the regional economy by creating a single market and a production base with free flows of capital and free movements of goods and services, as well as investment and skilled workers.
Within the AEC, Indonesia offers the largest market with its population of 240 million, which accounts for about one-third of ASEAN's total population of 600 million.
Kadin chairman Suryo Bambang Sulisto said local manufacturers could improve their competitiveness by adding value to their products via manufacturing. "The natural-resource processing industry needs to go through to the downstream industry and to manufacturing so that goods [that we produce] can be exported [with added value]," he said.
Suryo added that manufacturing value-added products could also help create jobs, reduce the country's dependence on imported raw materials and increase state revenues.
In an attempt to reduce its dependence on imports, for example, state-owned aircraft maker PT Dirgantara Indonesia plans to use more local aircraft components to produce its N219 commuter aircraft, according to the firm's director for technology and engineering development, Andi Alisjahbana.
"Indonesia depends heavily on foreign aircraft components, which account for 60 percent of the total components used here," Andi said, adding that the firm would gradually reduce its dependence on imported components to 40 percent by 2015. "We are waiting for local aircraft component manufacturers to sign a deal with us," he said. (tam)