GLOOMY OUTLOOK OVERSHADOWS INDUSTRY IN 2009

By Andi Abdussalam

Jakarta, Dec 23 (ANTARA) - The growth of the industrial sector, like other sectors in Indonesia, will slow down amid the global economic crisis in 2009, with the manufacturing industry likely to be affected most.

        The ministry of Industry has predicted that the economic meltdown will badly hit non-oil/gas sectors. But it could not yet provide an exact estimate on the slowing down of the industrial growth in the country in 2009.

        "In the wake of the global economic crisis, we could not courageously provide an exact estimate yet on industrial growth next year. We could only give an estimate of 3.6 percent. If an optimistic figure is expected, we could put it at 4.6 percent," Secretary General of the Industry Ministry Agus Tjahajana said here on Tuesday.

        Hope has been pinned on the manufacturing sector. This sector is expected to contribute significantly to the industrial growth. In the manufacturing sector,a moderate growth at 7.7 percent, or optimistic one at 8.7 percent is expected to come from the transportation equipment industry, machinery and tools. Yet this sector is predicted to suffer a lot from the economic crunch next year.

        Finance Minister Sri Mulyani Indrawati said that the most affected sector next year by the current global economic crisis would be the manufacturing industry.

        "Industry which is predicted to suffer from the most negative impact of the global economic meltdown is the manufacturing sector," the minister said here on Tuesday.

        In the face of the bad conditions the government provides help for industries in order that they would be able to cut their production costs, particularly to prevent workers' layoffs.

        "The government has been doing this. It is trying to reduce industrial costs by, for example, lowering fuel oil prices. We hope that the move would reduce the cost structure of companies," she said.

        The gloomy economic outlook next year is also predicted to overshadow other industrial sectors such as the textile and textile product industry.

        Director General of Textile, Machinery, Metal and Multifarious Industries Ansari Bukhari said the growth of the textile and textile product industry would slow down in 2009.

        "The growth of textile and textile product industry will drop by about 10 to 20 percent," the director general said.

        The same thing will also happen to the steel industry. Most of steel producers will reduce their production. Owing to this fact, the drop in the steel industrial growth is estimated at 30 to 40 percent.

        "But we hope that this condition would not continue to prevail throughout 2009. So far the steel industry in the country has been facing raw materials problems. They purchased expensive raw materials for two or three month stocks. If this problem is overcome, I think their products would be able to compete again with those from other countries," he said.

        Bad conditions are also to be experienced by agro and chemical industries because it is predicted that investment in this sector will also fall as what has happened in 2008.

        Foreign investment in this sector was reduced by almost 50 percent in 2008 from Rp3.3 trillion in 2007 to Rp1.6 trillion this year.

        In the meantime, Director General for Telematics and Transportation Equipment Industry, Budi Dharmadi, expressed optimism for a possible growth in this sector. His optimism is based on the 2006 experience when automotive sales dropped but the industry was still able to grow by about seven percent.

        He said that his office would reinforce two aspects in the face of the global economic crisis next year, namely the financial and commercial aspects. Several principals of automotive and electronic companies are providing assistance in order to reduce distribution costs from the factories to the dealers.

        The optimism is also based on the government's policy to provide incentives, among others in the form of government-borne import duties, government-borne value added tax and deferred income tax.

        "I think there will shortly be companies which will enjoy income tax incentives," the director general said.

        In the automotive sector, according to Budi Dharmadi, the biggest growth contribution will come from cars, namely about 2.8 percent, electronics (2.13 percent) and motorcycles (1.7 percent.

        In the meantime, the property sector will also face a sluggish growth. According to property sector observer Panangian Simanungkalit, the industry's capitalization or sales value in 2009 was predicted to drop to Rp70 trillion.

        Simanungkalit, who is also director of the Indonesian Center for Property Studies, said in 2007 the industry's capitalization reached Rp83 trillion and it was predicted to reach Rp83 trillion in 2008.

        Rising interest rates and oversupplies are the causes of the drop in capitalization. "Because the reference rate remains high, banks have increased their credit interest rates, so that developers have put a brake on expansions," he said.

        He said properties priced below Rp500 million per unit would still grow. Their market was still wide and their prices were relatively low, he said. However, it would be difficult for properties priced above Rp1 billion per unit to grow because they were already in oversupply, he said. (A014/A/HNG/A/S012) 23-12-2008 22:06:59