Technology Transfer In The Engineering Industries.

By Rahardi Ramelan.

INTRODUCTION Especially in the future, the numerical strength of our labour force will be of

great importance as an asset in the process of Indonesian development. However, we are. now facing a problem which is much more complex than any other in the development of these human resources. It involves not only the need for adequate funding and time, but is also concerned with their feelings, dignity, personality and culture. r·

With an additional number of 1.3 million people coming to the labour market each year, it will be impossible for the traditional agricultural work to absorb them. Thus, the industrial sector must be developed to absorb this growing labour force.

In the Pelitas (Five Year Development Plans) industrial development has been focussed on the sectors that will increase the funds needed for the development of the nation. These are the industries by which natural resources are especially processed for export purposes.

In such instances, choice of technology is determined primarily by compete­tive foreign matkets, for example, aluminimum, copper, nickel and LNG fac­tories. Such industries naturally involve complex technology, further processes, international markets and large investment. .

On the other hand, several other industries are flourishi ng, based merely on the low cost of man power. Therefore enabling them to survive in the internationa l market. These industries we usually call "padat karya". For example, semi-con­ductor factories and garment producers. Besides "padat karya ", the other charac­teristics of such industries are that the sources of raw materials, as well as as the semi-finished products, can be imported or obtained from local suppliers.

Apart from the above mentioned foreign-market-oriented industries, there are other industries which are directed mainly at the home market's needs, which utilise foreign imports. Here we see the fast growing industries of pharmaceuticals, food, textile, electronic, transportation equipment, etc. Using imported raw materials or semi-finished products, all fi nal assembly processes are done locally.

56

·In an attempt to reduce foreign dependency, we are developing industries which further utilise local raw materials. These include, the cement industry, petroche­micals and food.

This second group of industries are operated basically to obtain funds and to decrease Indonesia's reliance upon foreign countries through the use of domestic resources and the utilisation of the low cost in man power. Such industrial deve­Joprnent is carried out horizontally by expanding the volume of production. Consequently, it is not seriously concerned with the transfer of technology.

· . . · With the third Pelita, however, we began the vertical development of the en­gineering industries with thorough technology transfer. Government regulations ior the increased use of local components and content are but the Erst steps in the process of mastering new technology . . In carrying out this transfer of technology it is deeply felt to have other effects

in all aspects which influence the development of the industry. The need for skilled man power, standardisation and rationalisation of products, long term planning and consistent programmes of technology transfer, are the main charac­teristic of the process of developing such engineering industries.

PROBLEMS. Compared with the processing industries in which process and machinery more

greatly influence the product, the engineering industries are more influenced by the skill of their workers.

Skill can only be .. developed from a certain basic education, knowledge and technica l know-how. The skill learning process is determined by the work which is repeafedly done. This means that all commodities, with their different brands, types and models, need to be rationalised and standardised. We have to determine only the certain types and models of the new commodities which will actually be manufactured and developed.

The large increase in technological transferrence in the engineering industries will involve several kinds of technology, special skills and large investment. It has been agreed that consistent programmes and long term planning should be carried out both by the government and the investors.

In the first instance, where technological transference depends on the rapid acquisition of skill, the main area of attention will naturally be that of the actual acquisition.

Indeed, it is true that in certain metal industries, the involvement of one in­dustry with another is so close that a whole and complete concept on the indus­trial development is needed to prevent an overlapping in any future development.

APPROACH In principle, the development of engineering industries in Indo nesia should be

based on the idea of absorbing as much man power as possible and developing the skill in order to reach the competitive level of productivi ty.

As in other developing countries, Indonesia has so far been a mere technology market. Thus the ability to control the market becomes the most important step.

57

Technology transfere nce should be atte mpted step by step. The standardisation and rationalisa tion of the products will increase the

amount of skilled workers needed . The efforts to minimise the brands and types of vehicle industries and the centralisation of the aircraft industry means the acceleration of the learning process of mastering technology.

Content localisation also requires a greater number o f skilled workers. Regula­tions governing localisation contribute greatly to its effect. These have already been implemented in the moto r cycle, vehicle and electronic industries.

This vertical approach , from top to bottom, necessarily needs long term plan­ning and clearly defined programmes in the attempt to master current technology. Naturally, such programmes involve large amounts of capital, but, in return they tend to stimulate growth in related industries.

Clear cut policy and protection guarantees the continuing process of techno­logy accomplishment and should also encourage further investment. It should also be noted that existing investment is not merely to expand production volume, but also increases the initial value of the original investment. This in turn creates more work opportunities.

For this to take place, it is essential for Indonesia that its engineering industries . lose their former role as mere extensions of foreign conerns. Above all they

must chang~ their patterns of thinking from the old ideas of trade-to-industry. As discussed . earlier, these engineering industries grew up by controlling the

technology market, especially of foreign industrialised countries. At least at first, this makes it obligatory to import foreign technology if technology trans­ference is to be attempted. The objectives then should be defined; manufacturing capability of hardware/software, design capability, management capability. De­pending on the present available capabilities, the transfer of technology can be implemen ted through; license and technical assistance agreement, license agree­ment, technical assistance agreement, management assistance agreement.

From the license, a target of a certain level of manufacturing capability can be achieved completely. This includes the management of material purchasing anu the marketing of the final product.

At the end of this stage, the next step is to enter into the realm of design cap­ability. Considering the fact that a group of skilled engineers with proper experi­ence, facilities and management sufficient study of the design project in question will further help them achieve their objective.

Subsequently, a development programm.e must be implemented periodically : understood by both business and government. With the establishment of manu­facturing and design capabilities the industry should expand fully.

Nevertheless, despite the in troduction of step-by-step transfer of technology, industrial success cannot be achieved without the proper training of the required workforce a nd most importantly adequate funding.

CONCLUSIONS For stragegic products and capital goods, the cost of the learning processes

58

cannot be wholly placed directly upon the consumer because this may impede other industrial development. To ensure the successful application of techno-logical training programmes the whole Indonesian society must partake, sharing in terms of help and financing. This is especially the case in the state-run indus­tries, where all aircraft, communication and rail stock are the product and the property of the Indonesian nation.

Technology transfers which involve large scale financing can be carried out in two ways:

Domestic capital investment - private or government. or Foreign capital investment -joint venture. Nevertheless, it should be made clear that if we determine joint venture/foreign

capital investment the development of the domestic company's design capability may well be impaired by the already established design capability of the foreign company.

This product oriented approach should be followed by an integrated concept of the engineering industry. For instance, there are many sub-assembly products and primary components which may also act as intermediate products: air brakes for railway vehicles can also be used on heavy commercial vehicles.

Besides such-assembly and primary components, primary conversion of matal processes such as pressing, forging and casting can v:'lstly influence the policy on other products. For example, forging facilities can be developed through existing policies and used for a multitude of products.

Vehicle industries, railways, aircraft, electronics, motor cycles, and ships can all be used in a co'ordinated and integrated plan of technological transfer for the ed­ucation and benefit of Indonesia and its engineering industries.

59