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Low productivity, not imports, hurting local manufacturing competitiveness: Airlangga
“The problem is not always [influxes of foreign goods]. The problem is more fundamental; it’s capital expenditure [capex]. If an industry does not fix its capex, it will be automatically outcompeted,” the coordinating economic minister said on Monday.
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Visitors look at a textile machine during the 20th Indo Intertex Expo at Jakarta International Expo in Sawah Besar, North Jakarta. (Antara/ Akbar Nugroho Gumay)
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oordinating Economic Minister Airlangga Hartarto has said lagging productivity bears most of the blame for the limited competitiveness of Indonesian manufacturing in the local market, not cheap foreign goods.
Speaking to The Jakarta Post in a interview on Monday, Airlangga said a “productivity problem” had been plaguing the manufacturing sector long before the COVID-19 pandemic and before the country began blaming imports for weakening local manufacturing.
“The problem is not always [influxes of foreign goods]. The problem is more fundamental; it’s capital expenditure [capex]. If an industry does not fix its capex, it will be automatically outcompeted,” Airlangga said.
He added that many industry players had failed to optimize capex to improve their performance, most particularly in research and development and capacity-building for its employees.
In the case of the textile industry, many manufacturers were outcompeted by imports as they continued using outdated machinery, he said, implying rival producers elsewhere in the world might have invested in newer, better equipment, allowing them to achieve higher productivity.
Poor competitiveness has led to bankruptcies and mass layoffs at some textile manufacturers over the past few years, which Airlangga noted was also a result of overleveraging, as firms might have been borrowing more than they were able to pay back.
In response, the government has pushed factories to upgrade their machinery and has even rolled out incentives, including financing for small and medium enterprises.
