Many circles in some International institutions include Indonesia as one
of the countries in the Next Eleven (NII), following the steps of the foregoing
emerging nations included in BRIC (Brazil, Russia, India and China) in economic
growth.
Like BRIC nations, Indonesia is a great nation, with total population of
243 million, dynamic growing domestic market, and fast growing urban middle
class. It came as no surprise that Mc Kinsey Global Institute predicted in
their report, Indonesia would bear the title of the World’s Seventh Greatest
Economy in 2030 with 135 million consumers and market worth USD 1.8 trillion.
It might be concluded that the domestic market would be something
attractive, moreover to compare it against the market of the developed nations
where things were uncertain. Indonesia’s comparative advantage should be used
as secret weapon to safeguard the domestic market potentials from the invasion
of foreign made products.
In other worlds, the market potential and domestic consumers must be
fully benefited by Indonesian companies and entrepreneurs. Or else, the bright
prospect would only be enjoyed by foreign companies operating in Indonesia.
The key formula was domestic manufacturing industry which should be able
to complete against global-scale companies in fulfilling need for goods and
consumers a home in Indonesia. From the experience of Brazil and India there
were lessons to learn how important the domestic market was for local companies
to develop their innovative capabilities.
The low competitiveness of local companies in the industry was on
account of poor innovative and creative capability. The low competitiveness was
in the aspect of procurement, production, technical engineering, design, and
marketing. Many research bodies detected the fact that the handicap faced by
Indonesian producers was not in terms of “How to make” but in “How to sell” a
product innovatively.
Size of market was the primary requirement for producers who wished to
be economically successful, because it was related to economic scale and cost
competitiveness. The bigger the market, the more products would be sold, and
the lower the per unit production cost would be and hence the more efficient.
If the domestic market was growing, naturally the potential of local
producers to arrive at profitable economic scale and good cost competitiveness
would grow accordingly. The economic scale was most important especially for
Indonesian local producers who had to shoulder relatively big production cost
particularly labor-intensive industry.
To attain high economic scale was often hard struggle for Indonesian
local companies in developing innovative products which were of high quality
and highly competitive against global companies in the domestic market.
A different circumstance encountered global corporations. General world
class corporations could easily attain the right economic scale because they
were in possession of global portofolio. They could run overall production by
building a chain of production centers adjusted to the comparative advantage
and competitiveness of the related countries. For example to build a car, an
automotive producer could run assembling in one country, and build auto parts
in another. This was an example of efficiency in industry run by a global scale
automotive producer.
Beside the size of domestic market, consumer’s purchasing power were
also the determinant factors which enabled local producers to produce innovative
products. The Urban middle class people in Indonesian cities which was now
increasing, were the offspring of domestic market which were more dynamic and
demanding.
Consumers of this segment were reckoned to prefer design and product
quality and variety above everything and they were not the price-sensitive type
of buyers. They were willing to pay premium price as long as their demand were
fulfilled. So Indonesian producers were demanded not just to produce affordable
commodities but also to understand and meet the need of domestic market and
customers.
In this respect local Indonesia producers had their plus point over
global companies the reason was because domestic companies understood the local
customer’s taste and preferences. The socio-cultural aspect of trading were the
determinant factor of competitiveness of local products.
On the other hand international companies were hard to producer a
product which satisfied one single market for reason of efficiency (economic of
sales). Generally products made by global companies were a compromise of
different tastes of many countries or regions. Sales performance would depend
on marketing strategy, especially promotion.
With more demanding domestic market, Indonesian local companies were
demanded to be more creative and innovative not just when selling products to
the export market. A demanding domestic market was a forum for Indonesian
producers to run trial-and-error while developing innovative capabilities in
design, product development, procurement, production, branding, and marketing.
Inventiveness, creativity, and innovative capability of Indonesian local
producers which were already tested at the domestic market might serve as
stepping stone to explore overseas markets especially the emerging economies.
Hence the opportunities at the export market but also at the domestic market.
The Ministry of Tourism and Creative Economy could play a leading role
as facilitator for development of creative products which were marketable at
the Asian or global market. It was recommended to stage exhibitions of creative
products periodically at home and abroad to aggressively approach the market.
It was noteworthy that Indonesia still needed a strong manufacturing
industry and creative sector as locomotive of economic growth and at the same
time created employment. The growing urban middle class consumers were
challenging opportunities for local companies to strengthen competitive edge
particularly in creativity and innovation.
Strengthening competitiveness of Indonesian companies in the domestic
market were the key to survival where the national manufacturing industry were
able to resist trouble in times when export destination countries like
American, Japan, and Europe were crisis entangled and foreign products were
invading the local market.
Continuity of economic growth and welfare of the Indonesian people until
2030 would be determined by investment and development of domestic
manufacturing industry. Indonesia’s economy of the future should not be determination
by global corporations.
Meanwhile the banking sector as facilitator played a strategic role to
bridge need for fun of the industry for business expansion. The banking sector
was also demanded to be wise enough to offer competitive credit interest rate
especially for the processing industry which was labor intensive and
prospective business-wise. This strategy would maximize safeguarding of the
domestic market from invasion of overseas product. (SS)
Business News - January 02,2013
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