Saturday, September 30, 2006

Industrial Development Strategies in Indonesia: The Deployment of Technology and the Utilization of Small-Medium Industry *)

According to Lincolin Arsyad (1992), there are three main thoughts in designing appropriate steps towards establishing industrial sectors in Indonesia.

First of all, industrial development should be focused on sectors having comparative advantages. This thought is represented by economist-academics. Agriculture is the most important sector which grows steadily and our people generally depend on it. By nature, the comparative advantages will show in relation with the increasing of efficiency and productivity of one commodity. If this strategy is chosen, the industrial development will relatively be faster because agriculture is basically people’s base economy.

The problems will encounter later on as a matter of fact that this strategy is not conducive to industrial diversification; and on the other hand, agricultural harvest will decrease the term of rate in the international trade system. This condition in long term will affect our national balance of payment.

Secondly, our former president Mr. Habibie in 1983 launched the concept of the Eight Ways of Transforming Technology and Industry. This concept prioritises the development of upstream industries simultaneously. As a consequence, modern technologies applied in industrial sectors will become tremendous added values; and at the same time avoid the decreasing of the term of rate. But, if we look at carefully, this particular strategy seems in concert only with medium and large scale industries which bring a lot of capital cost. By contrast, our national mastery of modern technology is not sufficient, so that the technological leap can only be done by utilizing or stealing foreign technology. It is impossible for small-medium companies to take such action. And again, this – in short term – endanger our balance of payment.

The third thought is a concept of linkage between industries, and the keyword is partnership between large scale industries and small-medium ones. As we know, common problems in small-medium industries include funding, uncertainty in market, and standardization of products. Within this concept, they are supposed to help each other in funding, information sharing, and quality standard assurance; so they can increase their business performances. Later on, this concept is also known as a part of the so-called Corporate Social Responsibility (CSR).

Should industrial sector be a leader in our national economic development, small-medium industry must also be capable of competing in global market. China is a very good example of this situation.

For these reasons, Indonesia needs multi-dimensional development strategy. Every single problem in small-medium industry, ranging from cost capital, marketing system, to quality standard assurance should be minimized. The next step is how to increase their efficiency and productivity, and all national resources must be shoulder to shoulder overcome these problems.

The Paradigm of Independency
We offer two hypotheses about the strategy of technology development. These offerings based on thought that we have to change our paradigm of development; from pursuing technology to technologically independent. As far, we are always surprised with the advancement of technology in developed country like Japan. However, technology itself is geographic-dependent and time-dependent.
The chosen technology should be in accordance with our local conditions and needs, such as economic, social, culture, and religious aspects; and side effects of technology for our people now and in the future. We can not determine this choice by just looking the progress of other countries, and this is where the value of national independency takes place.

The first hypothesis is strengthening the mass-production based industry to fulfil national consumption. This step aims to enforce people based economy by utilizing simple technology. The priority is set to improve human resources, such as knowledge evolvement, increase the production opportunity, and innovation in technology.
Second hypothesis is empowering hi-tech industry for global market. The pre condition for this step includes the successful of the fist hypothesis. The characteristic of hi-tech industry is lot of funding, so screwing on this kind of industry can impair national economic structure, e. g. increasing dept.

The question remains. What do you like Indonesia to be? To be like America or Japan, or to be like Ethiopia? This is our assignment in the near future.

1. BJ. Habibie, Prof.Dr. Ing., Science, Technology, and Nation Building, Jakarta, 1991.
2. Mike W. Martin & Roland Schinzinger, Engineering Ethics, Foreword by Y.B. Mangunwijaya, Gramedia, Jakarta 1994.
3. Student Magazine of Mechanical Engineering, Gadjah Mada University, Propulsi, Edition 6, Maret 1995.
4. Gadjah Mada University Magazine, Balairung, The Development Strategy for Small Industry in Indonesia, Special Edition /TH.VIII/1994.
5. Prospective, Technology for Indonesia, volume 3 number 4, Yogyakarta, 1991.
6. Rahardi Ramelan, Industri in Indonesia Towards Industrialization Era, Paper Dialog of Technology, Chemical Engineering, Faculty of Engineering, Gadjah Mada University, 1992.
7. Sri Bintang Pamungkas, Paper for Industrial Engineering Seminar, Mechanical Engineering, Faculty of Engineering, Gadjah Mada University, September 1994.
8. Wardiyasa, Ir., Strategy for Technological Development, Paper in Dialogue of Technology, Chemical Engineering, Faculty of Engineering, Gadjah Mada University, 1992

*) I and two of my friends wrote a ten-pages paper entitled “Our Industrial Technology: Following or Disobeying West Countries?” in 1996 for a presentation in “National Dialogue for Engineering Student” in Makassar, Indonesia. This paper you read is the short version of the above paper.

*) International Technology and Management 4E (ITM) – 70671
Professor NAKAMURA Shuzo

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