Feb 04

Export Development and Problems

Posted By: admin

Data Central Bureau of Statistics (BPS) shows that the export value in January 2006, including oil and without oil worth 7.56 billion respectively, and 5.73 billion U.S. dollars, while import value respectively 4.39 and 3.18 billion U.S. dollars . Thus, Indonesia’s foreign trade balance for January 2006 including and without oil surplus respectively 3.17 billion and 2.55 billion U.S. dollars. Compared to January 2005 the export value, export value increased with and without oil and gas respectively 23.26% and 16.83%. The increase of export value is mainly due to higher export value of mining sector from 0.44 billion to 0.97 billion U.S. dollars.

Meanwhile, export data in May 2006 showed that the value of exports in that month recorded the highest monthly figure in history, reaching 8.34 billion U.S. dollars, an increase of 9.79% compared to the value of exports in April 2006. Meanwhile, the cumulative value of exports during January-May reached 38.39 billion U.S. dollars, an increase of 13.40% from the same period of 2005. Of this increase, the value of non-oil exports rose 10.52% and the value of oil and gas exports increased 7.22% from April. According to BPS (Kompas, Tuesday, July 4, 2006, p.17), the increase in export value in May caused more by the increase in exports from the mining sector in particular ore, crust, metal and ash. The export value of these products increased 113 million U.S. dollars compared to the value of exports of April.

In general, the high export value in May 2006 was caused by rising prices of many commodities such as crude palm oil (CPO), rubber and coal, as well as crude oil prices in world markets is still quite high. In the last five months, exports of rubber worth 776 million U.S. dollars, crude palm oil worth 360 million dollars, and coal reached 800 million U.S. dollars. Based on these developments, CPM predicts that Indonesia’s total exports in 2006 could reach 100 billion U.S. dollars if the world economy is conducive and world demand on export products of Indonesia remains high (Kompas, Tuesday, July 4, 2006, p.17).

When viewed from the year 2000, the value of total exports (oil and non-oil) had decreased from approximately 65.4 million U.S. dollars in 2000 to 57.4 million dollars in 2001, and thereafter increased continues until today. Therefore, the value of foreign trade surplus also had decreased in the same period of about 25 million U.S. dollars to 22.7 million U.S. dollars (Figure 1). If the approximate BPS is indeed realized, and the import growth was relatively stable, then Indonesia’s trade balance surplus can be increased at the end of 2006.

So far the government has tried to improve the competitiveness of Indonesian exports, including. This last decided to accelerate the process of establishment of the Export Import Indonesia, with the embryo Indonesian Export Bank (BEI). However, the effectiveness of any steps taken by the government all this time to boost exports depends on whether the appropriate measures regarding problems faced by Indonesian exporters in general over the years. According to World Bank research (2004), slow export growth mainly due to four factors.

  1. First, cost competitiveness (cost competitiveness), which declined due to appreciation of the rupiah and inflation higher than inflation in partner.The most important trades, such as the United States (U.S.) and European Union (EU). In addition, according to estimates from the World Monetary Institute (IMF), unit labor costs in Indonesia are now 35% higher than before the economic crisis of 1997/98. Cost competitiveness of manufacturing industries Indonesia is also caused by large domestic transaction costs in Indonesia. During the period 2001-02 level general prices in Indonesia have increased by 24%, caused by electric rate increase (102%), materials fuel oil / fuel (52%), diesel oil (159%), water (27%) and transport (32%) (James, Ray & Minor, 2003).
    Meanwhile, rising fuel prices in the second half of 2005 has resulted in a sharp rise in inflation rate by two digits (Thee, 2006). All this makes the production cost of Indonesia’s export goods become higher than in other countries. With Indonesia’s productivity level is relatively low not compensate for the increased cost of production, making the level of price competitiveness of Indonesian products in the global market decline relative to the price of similar products from other producer countries.
  2. Second, the investment slump. Indonesia’s poor business climate hamper export growth because they can not attract foreign investment, especially direct investment (FDI), which before the crisis is precisely the main actors in boosting non-oil exports, including industrial products. The absence of foreign investment means no new investment which is currently in fact very necessary to expand export production capacity and improve the quality and diversification of products (product upgrading). The experience of Indonesia during the New Order era in the development of non-oil export industry in particular shows that FDI is crucial to improving Indonesia’s export of industrial products has increased significantly during the period of the 80s until a crisis occurs. Stunning export surge from China is also largely driven by export-oriented activities of PMA.
  3. Third, the increasingly sharp international competition. China and Vietnam are strong competitors for Indonesia as they compete in the export of industrial products intensive in common with Indonesia, such as textiles, garments, footwear, and wood products are actually growing more rapidly than exports of Indonesia. Therefore, Indonesia recently lost market share in 30 non-oil exports, including industrial products, which is achieved by China and Vietnam (Pangestu, 2005). If poor condition of the national industry it is today with all sorts of problem remains unchanged, it is not impossible Indonesia will lose its global market share for industrial products have been the mainstay of Indonesia’s exports such as textiles and apparel (TPT), 2sepatu and product- products from wood.
    News in Kompas published Wednesday, June 28, 2006 (p.17) indicates that the timber industry and forest products in Indonesia worsened. Citing data from BPS, wood products and forest products in the last three years continued to experience negative growth. In 2004 the industry recorded growth of minus 2.1%, in 2005 grew at minus 1.3%, then increasingly mired in the first quarter of 2006 to minus 5.8%. Based on data from the Indonesian Wood Panel Association (Apkindo), Indonesia’s wood panel production has reached about 7 million cubic meters in the period of 1999-2000 dropped to 3.5 million cubic meters in 2005. In fact, Malaysia is predicted to produce wood panels up to 4 million cubic meters (Kompas, Wednesday, June 28, 2006, p.17). Than 120 plywood factories in Indonesia, the factory which until now still in use and has recorded exports its products to stay 52 factories. However, these factories produced with an average capacity utilization of less than 50% of normal capacity. (Kompas, Wednesday, June 28, 2006, p.17).
    Ironically, timber and forest products industry actually developed rapidly in competitor countries such as China, Malaysia and Vietnam which does not have its own timber. Indonesian furniture exports recorded 1.79 billion U.S. dollars, or grow an average of 0.088 billion U.S. dollars per year in the last 8 years. In the same period, exports of furniture from China grew an average of 1.1 billion U.S. dollars. China’s logging ban in the country’s furniture exports worth 14 billion U.S. dollars in 2005.
    But many assumptions bring Indonesia’s timber industry can survive because the industry is better able to adjust to market conditions by improving quality control, better design, ability to meet international environmental standards, and marketing yasng better in international markets (Aswicahyono & Hill, 2004 .)
  4. Fourth, weak trade facilitation. Various constraints at ports and physical infrastructure is one of the principal factors that increase the cost of exports in Indonesia. Although tariffs are relatively low use of Indonesian ports, but nearly all of Indonesia’s exports of container supplied (transshipped) via Singapore or Malaysia because Indonesia is so low port efficiency. According to a study of the efficiency of ports of Indonesia, International Container Terminal in Jakarta (Jakarta International Container Terminal, JICT), which is the main terminal in Tanjung Priok, Indonesia’s largest port, is the most inefficient terminal in Southeast Asia. Both in terms of productivity (number of containers that can be removed within one hour) and unit costs (the cost of lifting one container contains a size 40 foot, JICT at Tanjung Priok is the most inefficient compared with other ports in Southeast Asia such as Singapore, and Port Klang in Malaysia (Ray 2003).

Tags: Indonesia furniture manufacturer, wood furniture company.
Category: Furniture Related Article, Furniture Manufacturing.