ELECTRONIC HOUSEHOLD MARKET IN INDONESIA

The indicator for a positive economic development of a country is among others the development of the country’s domestic electronic household equipment industry as well as the market and purchasing power for such products. Indonesia, the 4th most populous country in the world, is a huge market potential for electronic household equipments despite a relatively low per capita income of nearly US$ 1,000.- in 2003 and low consumption of electronic goods and appliances. The multidimensional crisis that hit Indonesia in 1997 has no direct negative impact on this particular industrial sector, Indonesian consumers still consider such household equipments as a safer means to invest their money, where during difficult times such products can easily be converted into cash funds. During the period of 1998 to 2000, the industry grew at an average rate of 16%, a remarkable achievement when considering the fact that the economic turmoil was during this time at its highest level and hit nearly all business and industrial sectors badly. A consumer survey conducted in 2003 by a major foreign market research company revealed that the majority of Indonesian consumers, e.g. 62%, would spend their disposable income to purchase electronic household equipments such as flat color television set or other electronic products with new technology such as personal computer, mobile phone and digital camera, 44% for house renovation, 28% for a domestic holiday and 26% for new clothing outfit. This survey underlines the consumers’ attitude and behavior towards the appreciation for electronic household equipments.

The Indonesian electronic household equipment market is still dominated by the electronic products such as television sets and cassette radios as compared to the so-called electronic household products such as washing machines, refrigerators and air conditioning equipments. The government is strongly promoting the development of the electronic part and component industry in order to strengthen the industry structure considering the advantage and competitiveness of the country in providing abundant and cheap manpower, which this particular industry needs, since this industry does not really require a high level of technology.

Indonesian electronic household equipment industry is indeed a semi-manufactured, assembling industry meaning that most parts and components required for the manufacture of the finished products are to a large extent still imported.

The hesitance to invest in electronic component industry, however, is due to the relatively low production volume in Indonesia, which would make an investment not economical, with another words, the economies of scale is not reached yet. Indonesia’s installed annual production capacity for instance, is in the region of 4.75 million units of television sets and current production out put is 4.62 million units, a percentage of 97.3% also. This number, however, is still far below the ideal capacity of around 10 million television sets, which would be required to set up an efficient and competitive component industry. The competitiveness of the Indonesian electronic household equipment industry is also reflected in its export-oriented performance, specifically for television and radio sets, which has been Indonesia’s major export commodity for a number of years. This fact has mainly been contributed and attracted by the cheap and abundant manpower in this country. This position will have to be maintained by Indonesia not only in view of its advantages in providing employment to the abundant and cheap manpower but also because of the importance of this industry as an export-earning industry. Another hampering factor in expanding the industry is the smuggling of such electronic equipments for instance by manipulating documents, which disturb the already tight pricing structure in the domestic market.

In view of the very wide range of available electronic household equipments in the market, this study will limit itself in concentrating and evaluating only a selected range of products, e.g. television and radio set, refrigerator, washing machine and air conditioning equipment being the major product range in the market.

The tariff policy applied by the authority is obvious in the sense that the domestic electronic household industry is considered crucial and should remain competitive against the imported products. Basically, imported products are considered luxury goods and imposed with an additional value added tax in the range of 10% on top of the applicable import duty and import value added tax.