Tuesday, 3 December 2013


About downstreaming of national industry, perhaps the last tagline was “Better late then never”. The discourse on national industry downstreaming had surfaced some years ago, but the concept was never implemented. There was only discourse, discussions, seminars and talk show without boiling down to finalization. And in those for a recommendation was always set forth on how to realize national industrial downstreaming plan.

The issue of national downstreaming plan surfaced when deficit in current transaction happening to Indonesia stretched wider. One of the causes was that national industry had failed to meet domestic need so many producers had to import raw materials, auxiliary materials or semi-finished products from abroad, which had its impact on expanding deficit since 2011 last.

Direct investment in Indonesia was not supported by supply of raw materials and auxiliary materials. The result was depreciation of Rupiah because USD was needed to by them which became expensive by exchange rate.

To keep this bad condition from developing any further, it would be right if the Ministry of Industry took various strategic measures to step up competitiveness of national industry as main catalyst of national economic growth among them the acceleration plan of 2012-2014.

This was disclosed by the Ministry of Industry Mohammad S. Hidayat in this message on the occasion national meeting of KADIN, Industry Division under the theme of “Enhancing Added Value of Local Industry to Jack up Competitiveness of Indonesia’s Economy” in Jakarta recently.

According to the Ministry of Industry industrialization was exercised by 5 main strategies, i.e. [1] Downstreaming of mineral resources and agribusiness as resources of raw materials for products of added value at home. [2] To step up productivity and competitiveness of domestic industry [3] to enhance participation of the businessworld in infrastructure building [4] accerleration of decision making for debottlenecking [5] to promote intergration of the domestic market.

The Government’s underlying commitment in increasing added value was through Presidential Regulation no 28 year 2008 on National Industry Policy. Besides downstreaming of nature-based industry referred to Law no 4/2009 on Mineral and Coal Mining and Presidential Instruction no.3/2013 on acceleration through domestic processing and purification process at home.

Downstreaming of domestic industry had the objective to increase added value, strengthen industrial structure and provide employment opportunities at home. The industrial downstreaming program based on natural resources were mineral mining based industry.

In particular, downstreaming of mining-based industry was regulated in Law no 4/2009 on Mineral and Coal mining. Such was most important because the said natural resources were not renewable energy especially those based on iron/steel, aluminum, copper and tin.

By doing processing at home, the added value would certainly be highly beneficial and meaningful for accelerating national economic growth. By referring to downstreaming in natural-resource based industry, other industries could be encouraged to progress. Downstreaming in many sectors were aimed at meeting multi-objectives simultaneously.

Firstly, to meet domestic demand whereby to be independent from import and eventually stabilize Rupiah exchange rate value.

Secondly, to secure supply of raw materials and auxiliary materials to industry or local producers.

Thirdly, to enhance self reliance of national industry based on domestic raw materials and auxiliary materials.

Fourthly, to safeguard and maintain national economic sovereignty based on strong industry from upstream to downstream.

The effort to realize downstreaming of national industry could be successful if three main problems faced by the business world could be overcome through 3 recommendable steps:

Step one: to speed up rehabilitation and building of basic infra-structure including electricity, land, sea and air transportation and telecommunication.

Step two: to eliminate hindrances and legal uncertainty caused by disharmony between central and local regulations or abuse of power by law enforcers.

Step three: to speed up solution effort of space planning [RTRW] at provincial of regency level in all of Indonesia. Vagueness of RTRW had hindrance direct investment as investors were hesitant to invest considering all the high risks.

Strong commitment was needed by the Central and local Government with support of the public including political elite and institutions to step up settlement of RTRW. With clear RTRW, it would be convenient for investors to invest since the areas to be the site of investment including the economic prospect could be well identified.

The task of Governors was to help and make it easy for investors to invest their capital in the regions so regional economy could progress and grow. Eventually national GDP could be increased all for the sake of people’s prosperity. This was the point where competence and performance of regional leaders could be seen. 

Business News - November 22, 2013

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