An enterprise is an enterprising individual, organization, or entity engaged in industrial, commercial, or professional activities. The primary function of a business is to facilitate the production of goods or services at a reduced cost. Businesses may operate as for-profit entities or as non-profit organizations with a mission to aid individuals or advance social issues. There are a wide variety of business structures, ranging from one-person stores to multinational conglomerates. One may also endeavor to generate income through the production and sale of goods and services. The term for this is "business." Acquainting Oneself with a Company Generally, when someone uses the term "business," they are referring to an organization that operates for profit, industry, or labor. There are both concepts and names for things. A substantial amount of market research may be required to determine whether the concept has the potential to become a business. Frequently, a busin...
In just six years, the number of companies that make downstream products has grown from 21 to 101. With an annual growth rate of almost 50%, the value of exports has grown by a lot. After ten years, we controlled almost 80% of the market for downstream products. This "success" story is not about the nickel downstreaming scheme that is going on right now. The downstreaming program in the forestry sector started in the late 1970s. Its goal was to build businesses that use wood products and make the forestry sector more valuable by doing more than just exporting raw logs.It is expected that the program will not increase value added or create jobs, even though the timber business has done very well in shipping and making wood.
The idea behind and goal of flow
Because of the low price of logs in the United States compared to other countries, Fitzgerald (1986) found that the government loses 725 million US dollars in tax income every year and the economy loses about 200 million US dollars.Aswicahyono (2004) also showed that the wood sector's productivity kept going down over the next few years because of limits on exporting logs, which kept the prices of raw materials artificially low. The debt that is taken on to build up industrial capacity as part of this scheme also puts a lot of stress on the stability of the economy as a whole. This doesn't yet take into account the costs of long-term damage to the environment and the rise of rent-seeking in the business.
In the current government's downstreaming scheme, there are a number of things that need to be thought about based on lessons learned from past policies. To begin, it's important to have a clear idea of what the goal of downstream industrialization is, which is to raise added value. Added value isn't just the value of exports or sales of goods that come after. The difference between the value of the production and the value of the products or costs used to make it is the added value. In fact, for downstream nickel, the ban on exporting nickel ore has worked to bring in big capital for more processing. Because of this, exports of semi-processed goods like ferro-nickel have grown quickly, from about 1.4 billion US dollars in 2018 to 13 billion US dollars in 2022.
But the rise in added value still needs to be correctly calculated, especially since nickel ore exports have dropped sharply. Indonesia loses about 5 to 7 billion US dollars in export value every year because it can't sell nickel ore. Also, because of the ban on exports, the price of nickel ore in the United States is 50–60% less than the price in other countries. Indonesia has trouble getting other cocoa raw materials, like sugar, milk, and nuts, because of the case where cocoa exports were limited in 2011. For making ferro-nickel, more iron raw materials are being brought in from other countries. It's also important to think about how much it costs to build facilities and helper infrastructure, like power plants that are designed to meet the needs of processing. At the same time, it's not clear what good effects will have on the workforce because mining processing needs a lot of cash.
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Second, the ban on nickel exports has boosted production because it has been able to bring in more investments. China is very interested in building facilities and homes, which has led to processing investments in Indonesia.Indonesia is not the main producer of these 21 raw materials, so the government's plan to ban their sale is not likely to bring in investments. This is because demand for these materials is low around the world.
A ban on exports will only make upstream producers less likely to create, which will lead to less production. In 2013, rattan exports were banned. This made the price of raw rattan go down and caused a shortage in the industry that uses it. Both exports of raw rattan and exports of processed goods went down. There was a drop in the business after the export ban. Third, the ban on exports will force companies around the world to look for other ways to get the raw material they need, especially if Indonesia is the main source of it. This will cause costs to rise around the world. Limits on the export of raw wood are pushing the creation of particle board as an alternative. Exports of wood goods, especially plywood, have been going down since the early 1990s. The ban on exporting rattan has led to more production of fake rattan, which is better quality and costs less.
Nickel prices around the world have gone up quickly since exports were banned, even though nickel is an important raw material for making batteries. For this reason, companies around the world are starting to make cheaper batteries with materials other than nickel, like iron or sulfur. This could make it harder for Indonesia to become a big center for making batteries. Fourth, the growth of global supply chains over the last 40 years has changed the way foreign business is done. A company doesn't have to build the whole production chain for a product; it can get it from different places. Even if a country makes raw materials, that doesn't mean it can make money by processing goods that come after.
Instead, a country's businesses can become competitive by making finished things even if they don't make their own raw materials. Many European countries make a lot of chocolate goods even though they don't grow cocoa. Even though it doesn't grow wheat, Indonesia is the fourth biggest exporter of instant noodles, with an 8% piece of the market. The idea that people who make raw materials immediately have an advantage when they make finished goods is an old one that doesn't work very well.
Changes in shape
It's reasonable that people want to add more value and create jobs. But because there aren't any market processes, transparency, monitoring, or evaluation, export bans tend to do a lot of damage to the economy and encourage rent-seeking.In industrial growth, there are a lot of different policies that can be used. If you want to get investment, you need to keep making the business and investment environment better. One more policy choice is to offer technical or financial help with well-thought-out plans.
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