President Joko “Jokowi” Widodo has expressed his concerns over the performance of the country’s export sector, which continued to decline during the first quarter of this year despite the government’s serious efforts to promote overseas sales.
Speaking during a meeting with economic ministers and executives from Indonesian exporters, the President said the government and the business community needed to work extra hard to revive the country’s exports.
“We are committed to easing business permits and providing incentives, so please give more feedback right here to these Cabinet ministers on what the government can do for the private sector,” Jokowi said during the meeting, which was held immediately after an announcement that the country posted a US$2.43 billion trade surplus in the January-March period.
Representatives from Indonesia’s export-oriented industries attending the meeting included PT Astra International’s Prijono Sugiarto, the chairman of the advisory council of the Indonesian Textile Association (API) Benny Sutrisno and Indonesian Furniture and Handicraft Association (AMKRI) chairman Sunoto.
The businesspeople urged the government to cut bureaucratic hurdles in the tax restitution facility, to improve business access to banks, to undertake serious efforts to improve infrastructure and to reduce logistics costs.
The first-quarter trade surplus was the largest in more than two years, but the news was overshadowed by the sluggish performance of exports.
Exports decreased by 11.67 percent to $39.13 billion in the first quarter of the year on the back of weak external demand and low commodity prices, according to the Central Statistics Agency (BPS).
Outbound shipments of two key commodities — coal and palm oil — slumped by 18.33 percent to $4.6 billion and 13.56 percent to $4.57 billion, respectively.
On the manufacturing front, overseas sales of machinery and electrical appliances, the third-largest contributor to non-oil and gas exports after coal and palm oil, fell by 12.75 percent to $2.15 billion.
At the moment, resource-rich Indonesia is facing an uphill battle to boost its exports, which account for around 20 percent of its gross domestic product (GDP), given weak commodity prices and the persistent slowdown in its trading partners’ economies, most notably that of China.
It was announced on Wednesday that economic growth in China, Indonesia’s biggest trading partner, fell to 7 percent in the first quarter, the lowest level in six years.
“As our exports to China are mostly in the form of oil, coal and gas, we are now pushing efforts to drive up our non-oil and gas exports,” Trade Minister Rachmat Gobel told reporters on Wednesday.
“The job in hand for the Trade Ministry now is how to diversify our export markets, with Europe showing particular potential,” he added.
Indonesian Institute of Sciences (LIPI) economist Latif Adam said that such a poor export performance in the first quarter was a serious test for the government’s high ambitions to boost overseas sales.
The government has set a target of 28.67 percent growth in non-oil and gas exports to $192.9 billion this year, up from $149.92 billion, the first step toward tripling exports to $458.85 billion by 2019.
“Diversion to non-commodity exports is once again the key to increasing exports,” Latif said, citing textiles, footwear, electronics and the automotive sector.
The trade surplus came about only because of the plunge in quarterly imports, which fell by 15.10 percent to $36.70 billion from the same period last year as oil imports plunged by 44.53 percent to $6.10 billion, triggered primarily by lower global oil prices.
Non-oil imports also dropped by 5.05 percent to $30.60 billion along with reduced purchases of raw materials and intermediary goods as well as capital goods.
Imports of raw materials and intermediary goods, which represent 75.45 percent of total imports, slumped by 16.22 percent to $27.69 billion. Similarly, purchases of capital goods, which supplement direct investment, declined by 10.31 percent to $6.47 billion.
“The contraction in non-oil and gas imports, including capital and consumer goods, and the recent slump being seen in other frequent indicators may indicate subdued economic expansion in the first quarter of 2015,” Mandiri Sekuritas analysts led by Aldian Taloputra wrote in a research note.
-The Jakarta Post