A choice of two roads that lead toward building a new industrial base
''We don't know which is the right way,'' stated Indonesia's industry minister quite frankly. ''Do we go for a free-enterprise, survival-of-the-fittest, fast-paced economy?
''Or shall we continue with an organized, planned, slow-paced approach?'' asked A.R. Suhud.
The dilemma settles uneasily on Jakarta, the Indonesian capital, where an oil-wealthy government remains the largest investor and stockholder in the country's industries.
''Whatever our choice, we better hurry before the oil runs out,'' adds the industry minister.
By two measures, Indonesia is rushing to industrialization: One, it achieved a rapid 10- to 13-percent growth in industry during the last decade; and two, last year the government inked about $10 billion in contracts with foreign firms to build basic capital-intensive industries.
Still, as the third-largest developing country in numbers of people, Indonesia has been able to raise manufacturing to only 10 percent of its gross domestic product. China has reached 30 percent, and India about 15 percent, according to the Asian Development Bank.
In terms of ''value added'' to its products, Indonesia achieved only a 1 to 2 percent growth in the 1970s, says Mr. Suhud. Up to now, all the earnings of industry were going into paying for the imports of raw material for industry, he adds.
''We hope to put down the roots for basic industries and provide some depth to our manufacturing,'' he said. It may not be until the late 1990s, when Indonesia manufacturing is expected to reach one-quarter of GDP, that the country can be considered at a ''takeoff point'' for rapid industrialization, says Mr. Suhud.
With ample raw materials in minerals, timber, and other resources, Indonesia remains confident that it will be an industrial giant someday.
In plywood, for instance, it is aiming for 70 percent of the world market in the next few years, from 20 percent at present. And in processed rubber product, palm-oil, cosmetics, and synthetic textiles, new plants are being built.
Indonesia is following the Japanese strategy of distributing its basic industries around the country. This not only helps populate the outer islands but puts the plants close to the raw stock. Five ''growth centers'' have been pinpointed on Java, Sumatra, Sulawesi, and Kalimantan for such projects as petrochemical, timber processing, and aluminum.
Last year, however, the World Bank threw cold water on Indonesia's capital-intensive approach to industrialization, saying that it neglected to provide jobs and opportunities for private entrepreneurs. But Indonesian officials say such an approach runs counter to its Constitution, which is interpreted to mean that private enterprise can operate only in those fields that are not concerned with basic needs of the people.
The bank also encouraged Indonesia to lower its protectionism for home industries to make them more productive and competitive, and possibly turn them into exporters. But years of import-substitution policies, meant to build up domestic capacity, have been hard to withdraw. ''There's a lot of talk of free enterprise, but people still want regulations,'' said Mr. Suhud.
''It's hard for civil servants to help develop new business. We still have feudalist patterns. Now we should take a bit of risk. Let people make mistakes, and then they will do better next time.''
The missing link, says the industry minister, is between the new, or planned, heavy industries and the small, or consumer-oriented, plants. Many small factories are either run by the Chinese minority, or were set by Japanese investors in the 1970s. Stress will be laid on developing the intermediate, or engineering, industries in the coming five-year plan for 1984-88, says Mr. Suhud. ''The Chinese ought to be prepared to take more risks,'' he said.
One keystone to industry has been the giant $2.7 billion Krakatau steel complex on Java, named after a famous volcano that exploded in the 19th century. First stages of this integrated project have been delayed, althought Mr. Suhud expects it to be running full-steam in five to seven years. The Asahan aluminum plant in Sumatra, another industrial kingpin, will rev up by 1984. Such plants allow the government to ensure domestic supplies and cheap prices for downstream industries.
''Indonesian industry is very diversified with quick turnover,'' said M. Hadi Soesastro of the Indonesian Center for Strategic and International Studies. ''It lacks the depth or vertical integration to produce its own basic supplies.''
A capital market for new industries has not developed and business still must rely largely on government loans. An official policy to direct credit to the Pribumi, or non-Chinese, population has had difficulty in its implementation. A Pribumi entrepreneur group, known by its initials HIPMI, has seen a more than tenfold increase in membership in the past decade, but the number of pure Indonesian businessmen remains small.
''Our best policy is to get Pribumis into management positions first, then they can get into ownership,'' said Mr. Suhud. ''We are pressuring the Chinese to assimilate the Pribumis into business, but you have to train them first.''
In the meantime a government that has been awash with foreign exchange from oil exports continues to focus on the top end of industry, buying large plants from foreign sellers in hopes of laying down roots for a full-fledged industrial nation dash by at least the 21st century.