By : Cyrillus Harinowo Hadiwerdoyo
Recently, the top management of Unilever PLC from London came to visit operations in Indonesia. This visit was testimony to the success of their business unit in Indonesia, which grew with double-digit growth for many years. In fact, Unilever Indonesia is one of the fastest growing units of Unilever Global. Currently standing as the 10th largest contributor to the company’s sales, Unilever Indonesia has been progressing well with a number of products, including skin care products, fruit juices as well as ice cream. These products have only recently become a strong addition to the overall Unilever portfolio, on top of the already strong portfolios of home care as well as personal care products and foods.
While considered one of the fastest growing units in the world, in Indonesia Unilever also saw its peers post a much higher growth rate. Mayora, an indigenous consumer products company, has been growing at a rate of 30 percent annually. This performance has been followed by many other local consumer products companies as well as pharmaceutical industries. Therefore, in this range of industries, Indonesia’s manufacturers have been growing at a rapid rate. The statistics also showed that this industry has been growing at 9 percent in real terms, one of the highest performing sectors in the manufacturing sector.
I recently wrote an article entitled “The rise of the Indonesian textile industry”. Many textile and garment manufacturers have been growing also at a reasonably high rate, which has resulted in a larger export performance as well as the fulfillment of ever increasing domestic demand. In supporting this, Indonesian companies have started expanding the capacity of their polyester industries after hibernating for the last 14 years. In addition, the rayon industries have also rapidly increased their production capacity. South Pacific Viscose, a subsidiary of Lenzing Group of Austria, increased its capacity in May 2010 by commencing a fourth plant with the total capacity of 80,000 tons.
With that, the total capacity of South Pacific Viscose rose to 245,000 tons, the largest rayon factory in Asia. The company later announced the launch of a fifth factory to be completed at the end of 2012, which will put the capacity of the company at 325,000 tons. The factory will be the largest of its kind to be located on one site. The performance of the automotive industry, on the other hand, has been no less than phenomenal. If in 2008 the annual domestic sales reached 607,000 cars, the number shrank significantly to just 486,000 units in 2009 due to the global recession but rose very significantly once again to 763,000 units at the end of 2010.
In 2011, the automotive industry is growing again at a rapid pace, with the prediction to sell almost 900,000 units of cars by year’s end. These numbers are just a few inches closer to the milestone sale of one million cars, which most likely will be achieved in 2012, a level that was earlier predicted to only take place in 2014. In the area of electronic products, this year’s sales of the LCD TV increased by no less than 35 percent. Big electronic companies such as LG and Samsung have been competing heavily to secure the leading position in the industry. But at the same time local companies such as Polytron and Sanken have also experienced increasing demands.
In addition, Japanese companies such as Toshiba have multiplied their production capacities from 360,000 units to more than one million units, in which most products are exported. Aside from television, electronic industries have also actively produced refrigerators, stereo systems and many other products. All of these developments have led to a single conclusion, that the manufacturing industry has been very dynamic. Until the first quarter of this year, these developments had hardly been recognized by the Central Statistics Agency. According to this agency, the growth of the manufacturing industry has been lagging behind that of GDP.
Therefore, many believed that a process of de-industrialization had taken place. I have difficulty in reconciling my observations with the statistics. Looking at the developments of individual industries, my conviction is that the speed of growth of the manufacturing industry is supposed to be higher than the speed of the overall economy.
But I have no basis upon which to contradict the data. Therefore, it is encouraging to know that in the second quarter national account report, the manufacturing sector has been showing a marked increase. In fact, the non-oil manufacturing sector has been growing at the rate of 6.6 percent, slightly higher than the overall growth of the economy. This performance indicated that de-industrialization has been gradually behind us, at least in the non-oil manufacturing sector. This is so because the oil and gas manufacturing sector has been stagnant for some time. With the recent influx of foreign direct investment (FDI), we can predict that the manufacturing sector will experience a big boost in the coming years.
The Japanese earthquakes and the floods of Thailand have strengthened that trend. The disruption of the supply chains by these floods and earthquakes have awakened the Japanese and other companies to diversify further their production facilities, so that if there is a repeat of any such accident, there will always an alternative. That belief has strengthened the tendency to search for alternative places for production facilities, which also includes Indonesia as one of the candidates. The strengthening tendency of the incoming FDI has been clearly felt with the demands of the industrial area.
Many such areas in Bekasi, Karawang and Tangerang in West Java have recently received a lot of orders, which resulted in the increase of the land price on such industrial areas. Therefore, we can now predict that once these investments are realized, the total manufacturing capacity in Indonesia will increase. The start of their production will eventually increase the contribution of manufacturing industries in terms of the overall GDP. Learning from the financial reports of listed manufacturing companies, we can now conclude that the manufacturing sector will see an increase in size of their business, at the same time increasing their contribution to GDP.
If in the second quarter of 2011 we witnessed the rise of the non-oil manufacturing sector, we may hope that the next national account statistics (which produce statistics of GDP both nominal and real) in the third quarter of this year will confirm such a phenomenon and provide a leeway for broadening a sector that is experiencing fast growth. We had a phenomenon of industry-led growth in the time of president Soeharto, especially in the 1980s.
I believe that very shortly we will see such a phenomenon on a larger scale, which includes both oil and non-oil production facilities. If that trend continues, we can now easily predict that Indonesia will once again experience a period of industry-led growth. I believe that time will come in the not too distant future.
1 komentar:
In my opinion, this article has a good discussion. By reading this article, we can see how the development of foreign companies in Indonesia is very rapid, although the development of local companies are also not so disappointing. I disagree with the author, I think the authors take pride in the development of foreign companies in Indonesia. In my opinion the development of foreign companies can be a threat to the industry in the country for local companies. Successes of these foreign companies actually show that Indonesia has a high purchasing power. This is certainly well known by foreign companies, seen from the number of foreign companies setting up subsidiaries here. Workers they hire are also quite a few are natives of Indonesia. So I can say that we already have elements that are very supportive when we want to promote industrialization in Indonesia. A few days ago, Indonesian automotive industry has proven that we can create your own car. This is proof that if we are able to compete with foreign parties, since Indonesia already has a lot of experts. This article also as an encouragement we, as an industrial engineer, to create industry-led as we feel when the era of Suharto's presidency.
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