Habibie Says Boost Manufacturing, Now
Tito Summa Siahaan& Vidya Dahlan
Former President B.J. Habibie has launched a stinging attack on the government for allowing many strategic industries to reach the brink of collapse over the past decade.
Habibie said that production of aircraft, ships and trains had been halted in recent years and that some of the companies involved in those sectors were in the process of being liquidated.
“Every investment ever made for the development and training of human resources has been destroyed systematically, and Indonesia’s capability status has returned to where it was 60 years ago,” Antara quoted Habibie as saying during an event to mark National Technology Awakening Day in Bandung on Friday.
Habibie was the research and technology minister under Suharto, then served as his deputy and ultimately as president after the strongman stood down amid widespread public protests in May 1998.
Late in the Suharto era, from 1994 to 1996, industrial production rose at more than 20 percent a year before the Asian financial crisis hit in 1997. The industrial sector helped to keep economic growth at 7 percent or higher during that period.
Now industrial output is expanding at less than 5 percent a year, suggesting less attention is being paid to heavy manufacturing. Industrial production rose 2.55 percent in the second quarter, according to the Central Statistics Agency (BPS).
The onset of the Asian financial crisis put many Indonesian companies, included state-owned enterprises, on the brink of collapse. The government set up the Indonesian Banking Restructuring Agency to restructure companies including state-owned aircraft maker Dirgantara Indonesia, formerly known as Industri Pesawat Terbang Nusantara, which Habibie founded.
Habibie cited Dirgantara Indonesia as an example of a manufacturer in decline. It used to have 16,000 employees, but now only 3,000 remain. As they retire, they are not expected to be replaced.
Habibie was an engineer who trained in Germany, and before entering politics served as the chief executive of IPTN.
The Strategic Industries Management Agency (BPIS), which supervised more than 10 companies in 1998 and had a total turnover of $10 billion as well as 48,000 employees, had also been disbanded, he said, adding that the aviation, shipping, machineries, electronics, communication and weaponry industries no longer received the government’s attention.
“Without development programs at home, DI couldn’t carry out regeneration for engineers, eventually threatening the capability and competence of DI as an aircraft manufacturer. The same thing is also experienced by every company that was once under BPIS coordination,” he said.
Some economists and industry analysts support Habibie’s call to revive such industries. Said Didu, chairman of the Indonesia Engineers Association and former secretary general of the State Enterprises Ministry, said that strategic industries have plenty of room to grow, while emphasizing that they need consistency from the government as the end-user.
Changes in the Defense Industry Law will address the issue, according to Said who is involved in its formulation.
“It states that the Armed Forces and the National Police are obliged to use domestically made products, only when such products can be made locally. Otherwise, they can look overseas. Even then, the procurement contract will include either joint production or technology transference clauses,” Said added.
He said the Defense Industry Law would lure Indonesian engineers working abroad to return home, because more money will be spent on the sector.
Purbaya Yudhi Sadewa, chief economist at Danareksa Research Institute, agreed with Said, saying that Indonesian companies, especially DI, demonstrated good technology adaptation.
“They only need to be given an opportunity and support from the government,” Purbaya said.
Habibie said the condition of strategic industries was a sharp contrast from the state of affairs 17 years ago, when DI’s N250 fly-by-wire aircraft was, he claimed, equal to Airbus’s A300 and Boeing’s 777.
The N250 helped Indonesia win the Edward Warner Award, an aviation industry honor that was endorsed by then International Civil Aviation Organization secretary general Philippe Rochat.
“These two historical aviation facts proved that Indonesia’s human resources quality was the same as the United States, Europe, Japan and China,” Habibie said.
He said that Indonesia had a vast domestic market for transportation, communications and other sectors but demand was being met by imports that could have offered millions of working hours for research, development and production that could have benefited Indonesia.
“We have to be able to produce any goods that are needed by the domestic market and to offer incentives to anyone that produces in the country and providing working hours and job opportunities,” Habibie said.
Last month, DI president director Sukatwikanto said the aircraft manufacturer was ready for more work since it has signed contracts worth Rp 8 trillion ($844 million) for work through to 2016.He added that the company needed Rp 2.06 trillion in working capital to boost production, but the government had only approved Rp 1 trillion.
Additional reporting from Antara