Manufacturing industry to spearhead next phase of economic growth

INDONESIA'S manufacturing sector is projected to grow more than nine per cent a year - reaching almost 25 per cent of GDP by Christmas - as the country unveils its sixth five-year National Development Programme.

The Co-ordinating Minister for Industry and Trade, Hartarto Sastroscenarto, said that the manufacturing industry would spearhead Indonesia's next phase of growth.

He said: ''It will serve as the main engine of the economy and play a pivotal role in expansion of the nation's exports and in the creation of employment.

''We have an open economy.

''The building blocks are in place.

''Our next phase of growth has to come from being able to compete in the world markets.

''I am confident that the nation has the will and the resources to succeed in this endeavour.'' In his keynote address to delegates of the Indonesia, Asia Pacific and the New World Order conference in Bali yesterday, Mr Hartarto outlined a continued programme of development and deregulation.

Exports of manufactured goods have already far outstripped those of natural resources since the nation's first 25-year long-term development plan kicked off in 1968.

Over the period, the economy has grown at an average rate of more than six per cent a year.

''By the early 1980s, many of our industries had grown and made substantial contributions to the economy.

''Around the mid-1980s the Government took action to stimulate the greater efficiency and competitiveness of our industries, and we entered the 1990s with an economy reformed and realigned towards export-oriented activities.

''By 1991 the contribution of the industrial sector to GDP exceeded 20 per cent, a measure often used by world organisations to indicate that a developing nation has moved into an industrial era,'' Mr Hartarto said.

World Bank director (Indonesia) Nicholas Hope, also speaking at the conference, said Indonesia could be justifiably proud of its development record.

Annual income per capita had increased from US$50 in 1967 to $650 in 1992.

He said its performance placed it among the 10 fastest growing economies in the world, on a par with other dynamic East Asian economies.

Disaster did strike in the mid-1980s when the economy was damaged by collapsing oil prices, rocketing international interest rates and a diving US dollar.

The Government started on a two-pronged approach, using fiscal and monetary restraint and a lessened dependence on oil, to turn the economy around.

Mr Hope said: ''Over the next two decades, the share of oil in the economy could fall to only five per cent of GDP, from about 28 per cent in 1980 and 18 per cent in 1990.

''Maintaining the dynamism of non-oil manufacturing constitutes the core of this effort.

''The sector will need to post real growth of around 10 per cent a year for Indonesia to achieve its overall growth and export targets, and this would double the share of manufacturing in GDP over the next two decades to more than 33 per cent.'' Mr Hartarto forecast that by the end of this century the service sector - including engineering, banking and tourism - would join the ranks of agriculture and industry as driving forces of the economy.

In the first five months of this year, non-oil exports grew 28 per cent while manufacturing output showed an increase of 38 per cent.

Indonesian exports include steel and machinery, electronics, chemicals and ships.

According to Mr Hartarto, the country has shipped complete turnkey plants to Malaysia and Britain; highly sophisticated chemical plants to China; and helicopters to Norway.

Aware of the gloomy global economy, the Government has pledged to maintain a prudent macro-economic policy and improve its business climate.

Mr Hartarto said: ''In order to maintain the growth of our economy we will give special attention to improving the business climate, keeping the inflation rate low and encouraging the private sector to take the lead in business and trade.

''We will continue to deregulate the economy and to expand our trade relations.

''In our industrial policy we will promote export oriented industries, labour intensive industries, and upstream and capital goods industries.'' For the first seven months of the year, Indonesia's inflation rate stood at 7.6 per cent.

The Government's plans a rigorous programme of improved productivity.

It intends to further train up its labour force, develop higher value-added products and enhance its research and development facilities.