Development of the Indonesian Electronics Industry

Introduction

The electronic sector has grown quickly and being the fastest export growing for more than two decennaries in the freshly industrialized economic systems ( NIEs ) in the Asia Pacific, excepting Japan ( Hobday, 2001: 13 ) . Mention to Yeung ( 2007 ) as cited by Dicken ( 2007 ) , electronic industry covers assorted subsectors, from semiconducting materials to consumer electronics. The success narrative of electronic industry within the part has been confirmed by many surveies ; among others are Mathews ( 1996 ) , Mathews and Cho ( 1998 ) , McKendrick et Al. ( 2000 ) and Yeung ( 2007 ) .

As noted by Sturgeon ( 2002, 2003 ) , in the late 1990s there was a revolution within electronics industry in the sense of accomplishing cost efficiencies through economic systems of graduated table and supply concatenation direction. The Growth of electronics production non merely associated with growing in demand for consumer electronics, but besides with the increasing electronic applications for fabricating production and processing of information. For illustration, autos industry has been an of import beginning of electronics demand ( Wellenius, Miller and Dahlman, 1993 ) .

In discoursing electronics industry, it is really of import to see the displacement of electronics fabricating from Japan, Taiwan, Korea and Singapore to four states in ASEAN, viz. Malaysia, the Philippines, Thailand and Indonesia ( Rasiah, 2009: 123 ; Rasiah and Lin, 2005 ) . All of these four states had benefited from the resettlement of electronics fabricating from Japan, Taiwan, Korea and Singapore. This resettlement was chiefly caused by the grasp of Yen, Won, New Taiwan dollar and Singapore dollar after the Plaza Accord in 1985. Another factor was the backdown of a general system of penchants ( GSP ) from the Asiatic freshly industrialised states in 1988 to promote the enlargement of electronics fabricating to Indonesia, Malaysia, Philippines and Thailand ( Rasiah, 2009: 125-126 ) .

Significant foreign direct investing in electronics industry has been accepted by Thailand since the center of 1980s, Malaysia and Philippine since the late eightiess, and Indonesian since the 1990s. For the Indonesian instance, Thee and Pangestu ( 1998 ) shows the outgrowth of electronic exports from Indonesia in the center of 1980s, with several local companies have gained the ability of little fixs needed for the early phases of industrialisation. In the early 1990s when Indonesia started to develop electronic exports, electronics has been a turning industry sector in the universe economic system. It is indicated by growing of the value-added of electronics production about 6 % per twelvemonth in the early 1990s, about duplicate the growing rate of existent GDP ( 3.1 % ) , and much faster than growing in fabrication ( 3.8 % ) . Indonesia ‘s export chances in electronic merchandises were extremely conditioned by the rapid alterations in the universe electronics industry. These alterations included increasing worldwide sourcing of constituents, shortening merchandise rhythms, increasing capital strength of production, and increasing quality demands for even low-end merchandises. Indonesia electronics sector is still dominated by TNC subordinates, the common state of affairs of Southeast Asia states. This electronics industry produces many labour-intensive goods for export, the chief simple consumer and industrial electronics and constituents ( Hobday, 2001: 25 ) .

Electronicss industry occupies an of import function in the Indonesian economic system. As a dawn industry, electronic industry in the hereafter is expected to convey tremendous economic benefits for Indonesia if the growing and development is non hampered. The export of electronic merchandises is one of 10 chief Indonesian export merchandises, which could give positive part to the Indonesia international trade ( Ministry of Trade, 2007 ) . Indonesia is the fifteenth largest exporter in 2006 with the value US $ 8 Million, significantly increased from 28th place in 2000 ( Ministry of Trade and Center of Statistic Bureau, 2008 ) . The mean market portion of Indonesian exports of electronics in the universe in the period twelvemonth 2000-2006 was 0.99 % . The export value of Indonesia electronic merchandises to the universe tend to increase in the last six old ages with a tendency norm of 41.08 % ( Ministry of Trade, 2008 ) . One factor back uping the addition of Indonesia electronic exports in the universe is the decreasing of universe ‘s duties for Indonesia electronics merchandises from 9.28 % in 2000 to 6:41 % in 2006.

The export of electronics merchandises gives important part to the Indonesian economic system. In 2008, the entire value of electronics merchandises export was U.S. $ 7.65 billion, of which about 11.5 % of Indonesia ‘s entire exports ( Ministry of Industry, 2009 ) .

Although Indonesia has a comparatively high addition in market portion in the universe, but still less competitory when compared with other ASEAN states viz. Malaysia, Singapore, Thailand and the Philippines. The four states in 2006 obtained a market portion of 5.78 per centum, 4.38 per centum, 2.60 per centum and 2.16 per centum, severally. The major factor of this state of affairs is due to Indonesia excessively tardily in developing the electronics industry. The development of Indonesian electronics industry is still non optimum and non aa‚¬A“aligns ” with what is developing in the universe, at least in the Asia Pacific part. Some factors contribute to this state of affairs, among others were due to the unfavourable state of affairs in the state such as a job bureaucratism and, in peculiar Industrial policies in the electronics industry. These unfavourable Policies were caused by many factors such as no policy that truly incorporate and touched to the nucleus issues in the development of industrialisation in Indonesia. During this clip, the policies were chiefly reactive in nature, without systematisation and consistence. In add-on, the industrial development policies were non supported by engineering development activities such as research and development for the electronics industry ( Lall, 1998 as quoted by Thee, 2006 ) .

However, the Indonesian electronics industry still has a opportunity to be farther developed. Of class, it should be supported by appropriate schemes and policies of authorities every bit good as stakeholder engagements. In this regard, the authorities needs to take necessary steps, such as bettering investing clime, bettering substructure as roads, and back uping research and development ( R & A ; D ) activities ( Thee and Pangestu, 1998 ) . By these concrete actions, it is expected that electronic industry non merely will further developed, but besides will increase its part to export every bit good as to the economic growing at general in the hereafter.

Research Problem

From the brief background presented above, it is really clear that although electronics industry has given of import part to the Indonesian economic system, but its development is still lack behind compared with neighbour freshly industrialized economic systems such as Malaysia, Singapore, Thailand and the Philippines. In this regard, it is really of import to see the kineticss of electronics industry development in Indonesia, both in footings of its public presentation and policies/institutional alterations. To some extent, the kineticss of policies and establishments can be a sound placeholder to the function of province in economic development. In add-on, to see the comparative comparative of strength every bit good as promotion of the Indonesian electronics industry, analysis of fight is relevant to be presented.

Due to the account on the debut above it is clear that the electronics industry is an industry expected to turn good in the hereafter as in the 4 states in ASEAN are first developed. But on the other manus, if the development of this industry is non supported by the attempts of the authorities, the industry will merely go dead industry that does non hold the fight in the epoch of globalisation. That is why, it is necessary to make research to happen out about how the Indonesian electronics industry development in footings of the function of the province and fight in universe markets. So the hereafter of this industry could go an industry pillar for Indonesia.

The Aims of The Study

This survey is designed to analyse development of the Indonesian electronic industry with position of the function of the province and its competitiveness place. In this regard, the aims of the survey can be defined as follows:

To depict and research how the Indonesia electronic industry has been developed.

To analyze the Indonesian authorities policies and ordinances to back up the development of electronics industry.

To analyze the fight of Indonesia electronic industry in the universe market.

To place the chance of the Indonesia electronic industry.

Methodology

This research is designed to use both qualitative and quantitative attack. The qualitative attack is chiefly employed to obtain a comprehensive description of a phenomenon, i.e. the development of Indonesia electronic industry, in footings of its public presentation every bit good as policies and establishments alterations. In this instance, theory of the function of province in economic development will be used to analyze the importance of province in easing successful industrial development in Indonesia particularly for the electronic industry. Meanwhile, a quantitative attack with RCA tools will be employed to mensurate the fight of the Indonesian electronics industry.

In making so, both primary informations and secondary informations will be used in this research. The primary information was gathered from the field research utilizing questionnaire interview with major stakeholders of electronics industry, viz. Ministry of Industry, Ministry of Trade, and electronic companies. While the secondary informations are gathered by utilizing the library stuffs, web beginnings, academic Diaries, old instance survey beginnings, newspaper, authorities beginnings ( Ministry of trade, Ministry of Industry, Central Bank and Central of Statistic Bureau ) , UN Comtrade and WITS.

Structure of Thesis

This research consists of 7 chapters. There are:

Chapter I: Background of survey, research job and aim of survey.

Chapter II: Literature reappraisal, consist of the function of the province in authorities on development economic theory and revealed comparative advantage theory.

Chapter III: Historical of development Indonesia electronic industry.

Chapter IV: Research Methodology.

Chapter V: Discussion and research determination.

Chapter VI: Policies Proposals.

Chapter VII: Decision and recommendation.