Indonesian Exports are Still Prospective

Exports and imports have an important role of the development in economics sectors of a country. The role of exports and imports are fulfilling the needs of citizens, increasing Country’s revenue and encouraging the development of industrial activities. Central Statistic Agency (BPS) recorded a total export of Indonesia, during October 2011 reached US$ 16.80 billion. Although export figures are down 4.21% from September 2011, but compared to the same period in previous year which is October 2010 the export value was 16.70% higher. Crisis in Europe does not affect Indonesia’s export significantly to EU such as Germany, France, and UK. Based on the data, Indonesia’s export to EU countries have raised to US$ 1.48 billion in October 2011 from US$ 1.39 billion in September 2011.

Deputy Chief of Statistic and Distribution Services of BPS Djamal, the decreasing of exports in October 2011 from September 2011 due to falling 26.30% of oil and gas exports from US$ 3.93 billion becomes US$ 2.90 billion while, exports from non-oil and gas are increasing about 2.17 percent, from US$ 13.61 billion to US$ 13.91 billion. Cumulative value of exports from January to October 2011 noted about US$ 169.03 billion; it has increased 34.88% compared to October 2010. Here are five commodities from non-oil and gas sectors:

MAIN NON-OIL AND GAS EXPORTS BY COMMODITY

Description	Market Share (%)		Growth (%)
			Nominal		Real		Price
	2010*	2011**	2011		2011		2011
		Jan-Sep	2nd Quarter*	3rd Quarter**	2nd Quarter*	3rd Quarter**	2nd Quarter*	3rd Quarter**
1. Coal	13.8	15.5	19.7	9.2	23.0	5.2	- 2.8	3.8
2. Palm oil	10.4	10.2	81.1	- 20.4	89.5	- 12.2	- 4.4	- 9.3
3. Rubber Product	7.1	9.1	9.4	- 7.4	10.3	3.6	- 0.7	- 10.6
4. Textile & Clothing	8.7	8.4	2.1	- 1.1	0.1	5.9	2.0	5.1
5. Metal Product	7.6	7.9	4.2	- 1.1	6.1	3.9	- 1.8	1.1

*) Preliminary figure www.m.bi.go.id

**) Very Preliminary figure

Meanwhile, the value of import on October 2011 is US$ 15.65 billion; it has made up about 3.18% from September 2011. BPS also noted total of import from January to October 2011 is about US$ 145.68 billion, and it figures up US$ 36.18 billion from the same period of the previous year (October 2010).

Theories and Analyses

Receipt of payment for exports and imports of goods and services are summarizing in balance of payment in current account transactions. The difference between exports and imports is called net exports, or trade balance. If export exceeds imports, the country is said to run trade surplus, conversely if exports are less than imports is said a trade deficit. According to data, Indonesia has trade surplus about US$ 23.35 billion (Data from January to October 2011) and it equals to 26.5% of GDP (28% for exports, 25% for imports). In equilibrium condition: Y = C + I + G – IM + X (Y= Yield, C= Consumption, I= Investment, IM = Import, X = Export), from that equation if we ignore C, I, G, it can be said the higher export will lead to the higher yield, and lower export will lead to lower yield, conversely with import, higher import will subtract the yield, and lower import will lead to add the yield of one country. However it’s not depended on the volumes, but on which kind of goods or services.

Indonesia has well enough about the volume of export, but if we look deeper, almost the commodities are still in a raw material which has a lower price. According to data above, coal is the main commodity of non-oil and gas export; it is the highest export share of 15.5% during 2011 (until September). The value of coal exports during the period of this report is the highest value since 2009, amounting to US$ 7.1 billion or growing 9.2% compared to the previous period. Growth in coal exports are more influenced by growth in export volume (5.2%) whiles the price of coal exports grew by 3.8% in quarterly reports.

In third quarter-2011 palm oil exports experienced a negative growth of -20.4% compared to previous quarter, down from US$ 5.2 billion (2^nd quarter) to US$ 4.2 billion (3^rd quarter). In addition decreasing in export value was caused by decrease in export volume of palm oil and also affected by the world’s palm oil prices fell by 5.9% from US$ 1,147/MTon (2^nd quarter) to US$ 1,079/MTon (3^rd quarter).

Exports of rubber products are also experienced a negative growth (-7.4%) from the previous quarter. The export value of rubber products in 3^rd quarter reached US$ 3.6 billion, down from US$ 3.9 billion in 2^nd quarter. It is due to the decline in world’s rubber price by 12% of US$ 530.1 cents/kg to US$ 465.3 cents/kg. It caused by the weakening world demand due experiencing a debt crisis in EU, the weakening of U.S. economy and yet recovery in the automotive industry in Japan after the earthquake and tsunami.

The export value of textile and clothing on 3^rd quarter is US$ 3.4 billion, slightly lower than previous quarter. Decline of textile exports by 1.1% is caused by a decrease in export volume, mainly textile to the EU country destination which is the second largest market for Indonesian textile and garment exports. Exports of metal product in 3^rd 2011 was recorded US$ billion, down 1.1% from the period before. Decline in exports of metal products is caused by a decline in export volume metals, including tin (-14.2%s), aluminum (-3.5%), iron (-18.61%), and zinc (-21.3%).

Policies and Recommendations

According to the theories which say volume of exports is not the main thing to lead higher yield of a country, but it depend on which kind of goods. Government should increase the exports by sending intermediate or final goods to foreigner country. Actually Indonesia has a lot of natural resources but can’t process it to be intermediate or final goods, in my analysis one of the factor is Government has not yet concern about microeconomics sectors, it means the interest rate for them is still too high. They are not being able to continue the process to be intermediate or final good due to the limitation of the principle that they have. The monetary policy that government should do is decreasing the interest rate. Why? based on the theory, when the interest rate decrease, foreign investor will subtract the investment in Indonesia which is lead lack of the dollar or foreign currency that come to domestic, when it happens, it will decrease a exchange rate of rupiah to other currency. The decreasing of exchange rate will lead the increasing output, when output has increased it will push export to be increased. Otherwise it also takes the role of the middle class as “the driving engine” of economic growth in Indonesia, according to Senior Economist of INDEF Didik J. Rachbini, 10% the upper middle class in Indonesia has substantial purchasing power as same as Singaporean and some European. By directing and giving example to all citizens to buy, use and wear domestic product it will help micro business to be developed.

From the imported sectors, due to the theories “Openness goods markets are push the ability of consumers and firms to choose between domestic goods and foreign goods. In no country is choice completely free of restriction. Even the countries most committed to free trade have tariffs (taxes on imported goods) and quotas (restrictions on the quantity of goods that can be imported on at least some foreign goods)”. The Policy that should Government do to control imported goods is by keeping the tariff and limiting the quotas. From all those policies, hopefully it will subtract the dependency of imported products and push export to be growth.

Still, it is not only as Government’s homework, but also our responsibility as a good citizen to make Indonesia’s Economic grow significantly. Start from now on, let’s buying, using, and wearing domestic product constantly!