VIVAnews - According to the Indonesian government’s estimate, exports in 2009 will suffer a sharp drop compared to last year. The export may only grow between 4.3 to 8 percent. The weakening in world's market demand due to the global recession is the major cause behind this decline.
Only recently, the Indonesian exports have experienced a considerable increase. In 2008, the country's export was the second highest in Southeast Asia, next to Thailand.
To get the insight about the prospect of Indonesian export performance in 2009, VIVAnews interviewed Dr. Sjamsu Rahardja, an expert on international trade at World Bank. The following is an excerpt of the interview
What is your prediction for Indonesia's export in 2009?
Currently Indonesia faces a difficult situation. Global recession will become the main cause of our export decline. Currently, a number of Indonesian products have already felt the impact of the global recession due to insufficient demand, especially in the US and Europe. This has affected many sectors including, textile and clothing, furniture, shoes, and many others. In fact, the export of Indonesian furniture to America has been reduced to half.
When was the first time the global financial crisis hit the Indonesian export?
The indication for a setback has already been apparent since October 2008. At that time, our export declined by 11.6 percent to US$10.8 billion compared with September 2008. The decline in exports to US, China, South Korea and Thailand is the key factor behind the set back.
Does this mean that our export growth will be lower than the previous year?
I think, export growth is not only declining but it will also suffer a negative growth. The Indonesian government shouldn't hesitate or be embarrassed to revise its 2009 export target.
How can this happen?
Insufficient export demand and the plunge in commodity price are not the only issues here. For instance, currently the value of our commodity export suffered a decline after the price of our natural resource products in the world market plunged. In November and December, our commodity price will suffer the same fate.
How about domestic constraints?
Yet, on the other hand, the Indonesian exports also face several domestic problems, including the under-performance of our export financing. Our domestic banks have already reduced their loans to the exporters.
Why did they do that?
Since the decline in foreign demand due to the global recession, our banks are becoming more careful in channeling their loans to foreign trade since its risk exposure is considerably high.
What is the most prospective product in 2009 export?
Thanks to commodity exports, such as palm-oil, coal, and other mineral products, Indonesia is safe for the time being. Palm-oil and coal will be the engine of our 2009 export. The decline of their price will not affect their export volumes. It is attributable to the fact that the world still needs palm-oil to produce cooking oil, cosmetics, and other consumer products. The same thing applies to coal, where many utilities in Japan, China, and other countries still depend on Indonesian coal.
Does this mean commodity will become Indonesia's prime export?
The platform of Indonesian exports is quite unique, since it relies heavily on natural resources. Indonesia will be benefited by the increase of its commodity price up until the middle of this year. For instance, the price of raw palm-oil reached US$1000 per ton in mid 2008, although it is currently stabilized at around US$400 per ton. And do not forget that the performance of Indonesian non oil and gas exports in 2008 is still quite good, despite two huge problems they have to face in the last couple months, such as the decline in the commodity prices and the global recession. This is why the Indonesian exports managed to grow considerably and become the second best in Southeast Asia. Compared to any other countries in Southeast Asia, the growth of Indonesian export of 26.9 percent is the second highest after Thailand who achieved 34 percent growth.
What should we do to anticipate this export decline?
In the future, Indonesia has to diversify its export portfolio, extend its target countries, and improve the financing facilities for its exporters. This is essential for certain enterprises that were unable to access foreign bank, such as batik or aroma therapy exporters.
Is there a blessing in disguise in this global recession?
Indonesia could take over China's role in the world's export market. After all, the image of China's product is currently not quite good and its labor cost is increasing. Next, in 2010, when the economy is recovering, Indonesia will have much bigger shares in the export market.
Translated by: Edwin Solahuddin
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