How can Indonesia harness its resource potential?

Rokhmin Dahuri, ,  Jakarta   |  Thu, 01/08/2009 10:36 AM  |  Opinion

With its abundance of natural resources, population of 230 million and strategic geo-economic position, Indonesia, which has been independent for more than 63 years, should have become a developed and prosperous nation by now.

Unfortunately, however, Indonesia is still regarded as a developing nation, with its high unemployment and poverty and declining competitiveness.

Many factors have contributed to Indonesia's poor development record, but one of the most determining factors has been its inappropriate economic development policies. Such policies have failed to develop competitive advantages that could create sustainable economic growth and provide large employment opportunities.

Most of our leading industries such as pulp and paper, textiles, agro-industry, electronics and automotive are in essence foot-loose industries with high import content. About 90 percent of Indonesian industries rely heavily on imported raw materials and technologies.

It is therefore timely for Indonesia to boost its competitive advantage based upon its comparative advantages. As a resource-rich country, our main comparative advantages are actually in the form of resource-based industries (RBIs) which include fisheries and ocean resources, agriculture, forestry, biotechnology, energy and mineral resources and tourism, and non-conventional resources such as hydrate gas, deep sea water industries, bio-energy from marine algae, pharmaceutical products from aquatic organisms, wave energy, tidal energy and ocean thermal energy conversion.

The question is, then, why have RBIs not been able to promote Indonesia to become a developed and prosperous nation?

In the first place, we have not applied state-of-the-art technology in production, handling and processing, or in the marketing activities of most RBIs. More than 70 percent of our farmers and fishermen are traditional and lack technological capabilities.

As a result, the production of agricultural commodities and other renewable resources is far from efficient, productive or reliable. In addition, shortages of fertilizers and other production inputs, as well as a lack of irrigation systems, roads, electricity, telecommunication networks and other infrastructure in most rural areas and outer islands has hampered efficiency, productivity and sustainability of our agriculture and other renewable resource-based sectors including aquaculture, captured fisheries and animal husbandry.

Poor development of downstream industries and distribution systems has also resulted in roughly a 20 percent product loss in the post harvest, less added value and an inability to supply agricultural products and other renewable resources which meet quality standards and supply sustainability required by both domestic and global markets.

Besides wasting our foreign exchange, importing agricultural commodities has also paralyzed Indonesian farmers' competitiveness. Moreover, illegal logging, illegal fishing, illegal mining, smuggling and other illegal economic activities have not only resulted in state losses of up to US$ 50 billion per year but also have reduced our RBIs' competitiveness.

Contract agreements with multinational corporations in oil and gas as well as other mining businesses have benefited "them" more than "us" (i.e. more money goes overseas than remains here). Up to the present, the state budget and credits allocated for RBIs have also been inadequate.

Thus, as a nation we must have a vision that by 2030, "Indonesia shall be a developed and prosperous nation through the sustainable development of RBIs".

To materialize such a vision, we must apply appropriate and state-of-the-art technology in all management chains of RBIs including production, handling and processing, distribution and marketing on an integrated business system basis.

In order to increase added values and competitiveness, create more jobs and generate larger multiplier effects, we need to strengthen and develop downstream industries of natural resources.

Biotechnology that includes genetic engineering, bioremediation and extraction of natural products from biota and microorganisms for food and beverages, pharmaceutical products and other industries should also be enhanced in an environmentally sustainable manner.

Quality seeds, feed, fertilizers and other production inputs should be made available any time at a reasonable price for farmers, fishermen and other producers of renewable resources throughout the archipelago.

We must improve our existing irrigation, road, electricity and telecommunications networks, harbors, airports and other infrastructures and simultaneously develop new ones according to meet local needs.

Supporting industries for RBIs such as agricultural machinery and equipment, fishing gear, boat engines, shipyards and ICT technology should also be developed and strengthened.

We must protect productive agricultural lands, forest, aquaculture and other renewable resource systems from conversion into other land uses, pollution and other forms of environmental degradation.

The government and private sector must join hands to protect the domestic market from illegal and excessive imported commodities that may undermine competitiveness of our farmers and other producers of natural resources.

At the same time, we must boost the domestic market and diversify export markets. By doing so, we will help national producers, processors and packers of natural resource-based products to sell their commodities and products at any quantity and any time at profitable prices.

Illegal logging, illegal fishing, illegal mining and other illegal economic activities should be eradicated immediately.

Access to credit, technology, information and other productive economic assets should be made easier for farmers, fishermen, cooperatives, national companies and other stakeholders involved in RBI business and development.

The investment climate including procedures for obtaining investment permits, policy consistency and business security needs to become more attractive for both domestic and foreign investors. Monetary and fiscal policies must also be conducive to the development of RBIs.

Last, but certainly not least, human resource development as well as research and development programs related to RBIs must also be strengthened and enhanced.

It is strongly believed that by implementing such a vision and roadmap for the development of RBIs, Indonesia will not only be able to alleviate its chronic problems of high unemployment and poverty, but also will become self sufficient and one of the largest exporters of food, energy, minerals and other natural resources and their downstream products on a sustainable basis.

Moreover, Indonesia will join Brazil, Russia, India and China which have been predicted to be new economic powers of the world by 2030.

The writer is professor of coastal and marine resource management at Bogor Institute of Agriculture.

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