The decline in the performance of the country's Textile and textile product (TPT) industry including weaving industry as indicated by sluggish growth of production and sales shrinking is caused by inefficiency with machines too old to be fit for operation. The abolition of the export quota system by the United States and Europe as ruled by the WTO put the country's TPT industry face to face with giant rivals mainly from China and India in lopsided market competition. The quota restriction had been a protection for weak market competitors like Indonesia against powerful rivals.
Around 80% the machines and equipment of the country's Textile industry have been more than 20 years in age. The country's weaving industry had 204,393 units of machines already aged more than 20 years. Read more
Indonesia liberalized cellular telecommunications business in 1995. Since that year the government allows private companies to operate in cellular telecommunications business in open competition. Cellular telecommunications operation business became more attractive after the introduction of the GSM (global system for mobile communication) technology replacing the first generations of cellular telecommunication technology used in the country such as NMT (Nordic Mobile Telephone) and AMPS (advance mobile phone system).
The business expands rapidly in Indonesia placing the country the fourth largest market for that service in Asia after South Korea, China and Japan. The ranks are based on the number of subscribers from year to year. Read more
Increase in the prices of oil in the world market causes an increase in construction cost.
The country's property industry has expanded to follow the progress made in economic development. Many property projects including high rise office buildings, shopping centers, apartment towers and hotels have lined up big streets in large cities notably in Jakarta.
The sharp increase in the prices of oil in the past several months is feared to cause a setback to the property industry as the oil price hikes have been followed with an increase in the prices of building materials. Contractors are forced to recalculate the cost of their projects. Read more
Scarcity in the supply of feedstock namely naphtha has remained the main problem slowing development of polyethylene (PE) industry in Indonesia in the past 10 years. Naphtha is used as the feedstock for ethylene, which is in turn used as the main basic material for PE resin. This problem has been pointed out in a report of Joint Forum on Investment Competitiveness/SME WG Petrochemical Indonesia Japan in March 2007. Indonesia is lagging behind Thailand, Malaysia, and Singapore in the development of upstream petrochemical industry. Mitsubishi Chemical Japan in 2006 put Indonesia the 34th among countries having petrochemical industry in the world.
PE market in ASEAN is still highly potential especially after the implementation of AFTA. Petrochemical demands in this region total 4 million tons a year as against exports of 2.5 million tons. Production of petrochemical products in ASEAN grows by 6%-8% annually. Despite growing market demand, the growing presence of new players from Middle East in this region may pose a threat to regional industry. Read more
Increase in oil prices feared to cause a drag on Indonesian economic development in 2008
The prices of crude oil have been on the increase lately triggered by a number of factors including Middle East conflicts notably in Iraq and mounting tension between Iran and the West over nuclear issue, and the falling value of the U.S. dollar against euro and other major currencies.
Prediction of an increase of world's oil consumption also contribute to the pushing up the prices. The IEA predicted the world's consumption of crude oil in 2008 will rise 2.3 million barrels a day. An increase in the prices of crude oil may cause a decline in Indonesia's economic growth in 2008.
The country's sugar industry has declined in the past decade both in production and plantation areas despite improvement in the past two years.
The country's sugar production in the past decade shrank by 1,8% annually on the average and the plantations have not changed from 340,000 hectares in the past five years, The sugar content is also declining - with productivity down from 76.9 tons per hectares in 1990s to 62.7 tons in the 2000s.
Hoping to improve the performance of the industry, the government has announced plan to revitalize the industry with a production target set at 1 million tons in 2009. Read more
Food manufacturing industry came to the spotlight lately after manufactured food products from China were reported to contain dangerous chemicals. Indonesian authorities said Chinese food products were found to contain chemicals that could cause health hazard such as formalin. Indonesia is not the only one claiming to have found the dangerous contents, which will certainly damage the reputation of Chinese food industry but similar reports have also come from a number of other countries in Asia and Latin America.
Chinese food products have flooded the world market with highly competitive prices. Indonesia, the fourth most populous country in the word with low income is a potential market target for the Chinese cheap products. The Chinese products are highly competitive in price. Local products with basic materials mostly imported could not meet the Chinese products in open market. Read more
World's major car makers such as Toyota, Mitsubishi, Suzuki, General Motor, and Ford have known no more territorial borders in expanding their operations including manufacturing operations.
For efficiency and marketing, they established production bases outside their countries of origin in a bid to control or have a larger share of the global market. Currently Asia has been chosen as a new production center. Many worlds' class auto makers have made Asian countries notably Southeast Asian countries as production centers.
Apart from Japan, which has long been a strong rival for the United States and Europe in auto industry, a number of other Asian countries such as China, South Korea and Malaysia, have taken a big step toward a global player in the auto industry. Read more
The Indonesian people entered the year 2007 with great expectation that things would be better than in 2006 when the economy was rocked by soaring oil prices in the world market and increases in oil fuel (BBM) prices on the domestic market. The government's decision to raise the price of subsidized BBM in October, 2005 resulted in a slump notably in the manufacturing sector in 2006.
In 2007, the economic condition improved despite rising prices of crude oil to hit the US$ 100 per barrel level. The inflation in 2007 was kept low as the government maintained the prices of BBM, telephone and electricity tariffs. Meanwhile, Bank Indonesia cut its benchmark interest rate contributing to revival of the business sector.
In August-Sept. 2007 the world's economy was jolted by the U.S. sub-prime mortgage crisis causing a loss of billions of U.S. dollars to a number financial agencies in a number of countries. the world. Indonesia fared better. Read More
The country's banking industry has gone up and down especially after the 1998 crisis, which caused the liquidation of many ailing banks with a number of other undergoing restructuring under the bank restructuring agency (BPPN).
A number of the banks put under control of BPPN, during the 1999-2004 period, were later liquidated. Some of them were acquired by investors and some other were combined in merger. Those banks face financial problems mainly because of large non performing loans (NPL) in 1999, the country had 164 banks but the number was reduced to 133 in 2004.
In a bid to revitalize the banking industry, the government planned bank restructuring program in 1998. In 2004, Bank Indonesia launched its consolidation program called Indonesian Banking Architecture (API) to be fully implemented in 2010 when all banks must have capital at least Rp 100 billion. Read more
The prices of various types of metal have continued to scale up since 2005. Increases were recorded for almost all types of metals produced in Indonesia including nickel, tin, gold, silver, copper, bauxite and iron.
In 2005, the selling price of tin averaged US$ 7,507 per metric ton, up to US$ 13,700 per ton early 2007. The prices of nickel in matte of PT INCO in the last quarter of 2006 averaged US$ 24,725 per ton (US$ 11.21 per pound) or a 148.5% increase from US$ 9,950 per ton (US$ 4.51 per pound) in the same period a year earlier. Similarly the prices of gold, silver and copper have also increased.
The rises in the prices of metal have encouraged investment in the mining sector after long slump earlier. State-owned tin company PT Timah Tbk, which slowed down production when the price of the metal fell, has not received a boost to increase output especially after the government cracked down on illegal smelters and miners. Read more
In the past decade the modern retailers have expanded rapidly. According to the association of Indonesian retail companies (Aprindo) retail business grew 10%-15% annually. Retail sales in 2006 were valued at Rp 49 trillion and this year the sales are forecast to rise to Rp 57 trillion. The condition would be more conducive for retail business with the cut in the Bank Indonesia interest rates and efficiency in production cost.
Modern retailers have a share of 30% with traditional markets taking 70% of the retail market value. The opportunity is still wide open for modern retailers to grab a wide share of the retail market. Modern retailers have continued to expand with new outlets springing up in large cities. Read more
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