Amidst growing anxiety among many circles about Indonesia’s trade deficit over three consecutive months, the Government still breezed out optimism. Indonesia’s trade balance (NPI) was widening, reaching the level of USD 32 billion in September 1, 2012. However, the deficit was not going to affect employment figures.
Deputy Minister of Finance Mahendra Siregar admitted that the lowered export value had its impact on lowered industry income such as mining, manufacturing and other industries. Nevertheless the lowered export would not affect employment process at home. Hence employment targets would be met as targeted.
The Government was confident that employment was guaranteed not to shrink because industry kept running well. Downturn of export was due to lowered commodity prices, not because of lessened volume. Therefore industrial activities would keep running.
Previously the Central Board of Statistics (BPS) released export figures of June which was posted at USD 15.3 billion, down by 16.4% compared to June 2011 at USD 18.3 billion. On the other hand, export value of that period rose by 10.7% from USD 15.07 billion to become USD 16.69 billion.
Meaning there was deficit of USD 1.33 billion, way above April and May when deficit was posted at USD 485 and USD 641 million respectively. This deficit would expand if the condition in Europe changed for the worse and commodity prices were falling.
Indonesia’s trade balance where deficit broke through USD 1.33 billion was by far more severe than the prediction of most economists. However, they still saw the positive side of Indonesia’s June performance. The first positive side was that two third of downturn was contributed by the oil sector. A condition as such was acceptable because the oil-gas sector was having downturn in commodity prices.
However, some factors were notable in this downturn, and price downturn was the prevalent factor. ICP dropped by 12.9% in June. In addition to that global demand for oil was declining which reduced export of gas. The Government’s policy to prioritize domestic consumption was contributing factor to export downturn. However, export performance might bounce back if demand for oil increased.
In the non oil-gas sector, export was downsized due to downturn of commodity price. For example, price of coal dropped by 10% in one month. However, no significant downturn was seen in volume or demand from main buyers like China. It was true that China’s economy was hit by the chain effect of the crisis in Euro zone, but the impact on Indonesia was small.
Domestic demand in China was not declining. Demand for coal and steel in China were even increasing. The stimulus policy and monetary violations were believed to prevent economic downturn.
But accumulatively, through January-June 2012, Indonesia’s trade balance still booked surplus of USD 476.2 million, with accumulated Export of USD 94.41 billion.
As with deficit of last June, the main cause of deficit in trade balance was trade balance of the oil-gas sector which posted minus USD 1.37 billion due to transaction in oil business which posted minus to transaction in oil business which posted minus value of USD 11.8 billion. Thankfully Indonesia’s trade balance in gas was still surplus.
Country wise, with ASEAN nations deficit was posted at USD 727.6 million, but with Malaysia Indonesia still posted surplus of USD 1.28 billion. The biggest deficit was against Thailand, i.e. USD 3.07 billion. Beyond ASEAN, the biggest deficit was against China, i.e. USD 4.045 billion.
Export of non oil gas in June 2012 was posted at USD 76.83 billion or falling by 2.79% year on year. Based on export market share: to China USD 10.45 million, Japan USD 8.72 billion, and USA USD 7,46 billion. Combined total export to the 3 countries came to 34.66% of total export. Export to ASEAN states reached USD 15.46 billion.
Import in June 2012 was posted at USD 16.69 billion or up by 10.71% against same period of last year amounting to USD 15.07 billion and against May 2012 dropping by 2.05%. Total import of January to June was 2012 USD 96.41 billion, an increase of 15.35% year on year. In terms of import China was the biggest at USD 14.49 billion, Japan USD 11.78 billion and Thailand USD 5.76 billion.
Because import through Semester 2012 almost equaled Indonesia’s export, it means trade balance was most likely to happen in this year 2012. Total export through January – June accumulatively came to USD 96.69 billion while total import was posted at USD 96.41 billion. Although Indonesia’s posted at USD 96.41 billion. Although Indonesia’s trade balance through January-June was still surplus, there was a growing tendency of import always exceeding export.
Indonesia’s import-export balance sheet in June 2012 was posting deficit of USD 1.32 billion. Total export slumped by 16.44%, while total import rose by 10.7% compared to June 2011. Downturn of export was estimated due to adverse market condition in crisis torn Europe. Moreover Europe was Indonesia’s export important destination for non oil-gas products which was posted at 11.73% of total export.
On the other hand, Indonesia’s non oil-gas trade balance with ASEAN countries through Semester I 2012 was also showing deficit of USD 727 million. Total of Indonesia’s non oil-gas export to ASEAN through Semester I 2012 was posted at USD 15.46 billion, while import came to USD 16.18 billion.
ASEAN as Indonesia’s export destination posted 20.12% market share of Indonesia’s total export of non oil-gas products, while in terms of import ASEAN countries controlled over 21.15% of Indonesia’s domestic market.
The biggest importer country to Indonesia was still Singapore with import totaling USD 5.45 billion followed by Thailand USD 5.76 billion and Malaysia USD 3.19 billion while other ASEAN states exported non oil-gas commodities to Indonesia at the value of USD 1.78 billion.
Based on the above data the Government must scheme up a strategy to jack up trade surplus. By theory, the Government was obliged to jack up export by various means while trying to downsize import. But the policies in effect seemed to contribute more to slowing down export and stepping up import. This all had to be reviewed.
For example, Japan protested the Indonesian Government’s policy to restrict export of mining raw materials through imposition of 20% export tax. For that matter, the Ministry of Industry MS Hidayat planned to meet Japanese business associations and investors combined in the Jakarta Japanese Club on August 8 next.
In that meeting the Minster of Industry planned to explain the background of Indonesia’s policy to tighten export of raw mining materials. What was being done by Indonesia could have been done by any country who realized that for decades they had not done anything to put some added vale on the raw materials that they produced.
The Minister asked Japanese producers of mining products to relocate their industry to Indonesia whereby they could obtain low priced raw mining materials. The spirit of the message was that Indonesian Government invited them to move to Indonesia. The Government of RI would guarantee supply of raw materials and facilitate various incentives of taxes has fiscal including import tax etc. Other countries had moved to Indonesia, only Japan had not.
As told, the Government’s aim to tighten export of raw miming materials was to enhance industry downstreaming process at home. The way it had been, Indonesia’s mining materials were exported raw. The Ministry set forth that overseas investors had come to state their interest, among other from China, France and some other European states and Korea, while investors from Japan had not.
There was one regulation which needed to be reviewed, i.e. rule related to Government’s plan to include mineral products of metal category into category of products upon which export tax would be included in accordance with Regulation of the Ministry of Finance (PMK) no 75 year 2012. The export tax to be imposed was 20%.
Mineral products which were not included in the PMK Ministry of Finance no. 75 year 2012 law particularly of metal types, export tax of 20% would be imposed as on other mineral products. The stipulation of export tax imposition of metal minerals would be after limited meeting lead by the Coordinating Minister of Economy. The point was, were the players of domestic industry ready to process metal mineral products to meet local need?
Other points was that the Government was urged to make a breakthrough to anticipate competition in the pulp industry as well as to synchronize with the Regulation of Uni Europe of March 2013. The breakthrough was among other to apply forest management system in accordance with the forest of high conversion (HCFV) as done by Asia Pulp & Paper.
By that step the Government was expected to promote pulp and paper industry in Indonesia in order to meet international standard of trading and environment. Today only APP was applying HCFV system in developing business. Roadmap of APP could serve as paradigm to the Government in leading Indonesian companies in facing global chanllenges in the coming decades.
Previously to fight illegal logging, Uni Europe was making Forest Law Enforcement and Trade (FLEGT) Action Plan. FLEGT had the objective to help producer countries to step up management and build up capacity to eradicate illegal logging, to prevent or reduce consumption of illegal logging and UE investment which accounted for illegal logging and prevent entry of illegal wood to the Uni Europe market.
To meet FLEGT objectives, UE created Voluntary Partnership Agreement (VPA). VPA was a practical mechanism to detect and exclude illegal logging from the UE market. The final objective of this agreement was to abolish illegal from the domestic and international market. Countries who signed this agreement could export legal wood only to UE.
Not less important was that the Government must strive to reduce dependency on import, particularly agricultural commodity. Take for example import of sugar. The Government must try hard to minimize dependency on imported sugar so that domestic sugar products could sell better.
Essentially the spirit needed was not to import excessively which means that consequently sugar productivity at home must be stepped up. In addition to that, to jack up jack up productivity of sugar yields of sugar essence in sugarcane must be increased so domestic production of sugar could be increased.
For comparison, Thai Farmers were now able to produce sugar yield essence between 12% and 14% and none was below 10%. High sugar yield essence was also found in Brazil, minimum at least 12%. If other countries could attain high degree of sugar essence yields, surely Indonesian sugarcane growers could increase yields up to 12% or even 15% in order to promote sugar industry and growers’ welfare. Hence national sugar production output could be increased and self-sufficiency in sugar could be attained.