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Tuesday, February 07, 2006

Trade figures reveal problems faced by local exporters

Despite record 2005 export earnings, a closer look at the trade statistics suggests the country's manufacturers are having a tough time competing overseas, particularly against more efficient manufacturers from other countries in the region.

The Central Statistics Agency (BPS) reported last week that the country's export earnings jumped by 19.53 percent from the 2004 figure to a record US$85.6 billion.

But according to a more detailed BPS report obtained by The Jakarta Post on Monday, volume-wise, exports only grew by 10.09 percent last year.

Dantes Simbolon, the head of the BPS export statistics subdirectorate, explained that soaring global commodity prices had contributed greatly to the at-first-sight impressive performance.

By volume, oil and gas exports were down 8.6 percent, while non-oil and gas exports, including minerals but excluding coal and sand, increased by 13.1 percent, the BPS figures show.

What is worrying is that in the manufacturing sector, exports of textiles and garments, furniture and electronics have dropped in volume terms. These sectors are among the largest contributors to export revenue and job creation.

Textile and garment exports, for example, only amounted to 1.03 million tons as of October 2005, while exports of these goods reached 1.63 million tons the previous year.

The last two months of 2005 would not have added much to the figures as the year-end is always slower for export-oriented businesses.

Left struggling by China's booming textile and garment industry, Indonesian exports of these products failed to achieve the targeted figure of $7.9 billion, and grew by less than 5 percent last year.

The industry has been plagued by overlapping problems of increasing energy costs, smuggling and aging machinery.

The Indonesian Textile Association reported that 77 export-oriented firms had ceased operating because of increasing energy costs and eroding markets due to a slump in competitiveness.

Meanwhile, exports of wood products and furniture dropped to 3.2 million tons last year as compared to 5.3 million tons in 2004.

The Indonesian Furniture Producers Association placed the blame for the decline on a lack of raw materials and soaring prices for teak -- which is heavily used in the production of furniture destined for export.

Meanwhile, producers of electronic goods complain of the high import duties imposed on components, leading to a lack of price competitiveness on the export market.

This led to a decline in electronics exports to 0.5 million tons last year compared to 0.67 million tons in 2004.

Indonesian Chamber of Commerce and Industry vice chairman Rachmat Gobel said the government needed to further lower the import duties on raw materials for the electronics sector in order to restore competitiveness.

Given the myriad of complaints from the private sector, observers say it is clear the government needs to be more alert in responding to changes in the global market if it wants Indonesia to maintain its place among the ranks of the emerging economies.

The Jakarta Post, Jakarta
February 07, 2006

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