Tuesday, 30 July 2013


There was an analyst who concluded that the recent pressure on Rupiah was on account of Indonesia’s bad balance of payment. There were also some who criticized bad balance of payment. Perhaps those analyzes were right, because low payment performance created a negative impression among investors so they tend to avoid using Rupiah as reference urrency.
As footnote, balance of payment was a record of all international economic transaction including trading, finance and monetary between one country and other over a certain period usually one year often referred to as inflow and outflow of payment.
Balance of payment was essentially a system of accountancy which evaluated financial performance of a nation. Recording was exercised by way of double-entry book keeping system, in which one transaction was recorded as credit and other as debit. The transactions recorded as “credit” would be include into forex reserves. Forex entry came from transactions foreign currency, which reflected national buying power.
Meanwhile transactions recorded as debit was outflow of forex. The forex outflow were expenditures paid in foreign currency, which might represent downturn of external purchasing power or power of forex expenditure capacity.
Every credit entry [marked “positive”] must be balanced with debt entry [marked “negative]. The two entries were combined to produce data resources and use of national capital [for example how to obtain fund/purchasing power and how to use them]. So total credit and debit of balance of payment of a certain country would be the same by aggregate, but in terms of components of the balance of payment there was there was probably surplus or deficit.
Meanwhile Balance of Trade was a terms used to describe the difference of monetary value between import and export. Trade Balance was commonly referred to as netto export. If trade balance were positive it means the country was posting export more than import, normally referred to as trade surplus. On the other hand if the trade balance showed negative condition it means the value of import exceeded import, often referred to as trade deficit. Naturally, a condition of surplus was more expected by any nation.
Trade surplus means that export exceeded import. The condition had its positive impact on the surplus country, but a condition of imbalance could trigger trade tension between deficit troubled country and surplus fortunate country, the way it happened with the USA and China.
USA-China bilateral trading had created deficit for the USA since 1960. Finally this trading deficit had forced America to stop gold benchmarking in 1971. Since 1997 America’s trade deficit had chalked up exponential increase. The last time the USA posted trade surplus was in 1975.
America’s trade deficit was happening against China. In April, trade deficit in the USA against China was posted at USD 19.3 billion or nearly 50% of total US deficit in trading. Therefore China’s bargaining position against the USA was now stronger as they were enjoying surplus. It seemed reasonable if America insisted China to strengthen their currency, Yuan, [Renmimbi] so US deficit could be downpressed.
So as far as Indonesia’s trade balance was in deficit, it was for Rupiah to strengthen firmly. This was confirmed by the Government’s statement that export performance which never increased made the Government pessimistic there would be any trade surplus even till end of year.
The Board of Fiscal Policy [BKF] of the Ministry of Finance estimated surplus would only be after 2014. Surplus of trade balance was determined by export. If export was hindrance by falling commodity the way it was happening now, deficit of trade balance would continue to happen.
To illustrate, Indonesia’s biggest export was commodities like CPO and coal. As global economy changed for the better, normally demand for the two commodities would increase.
On the import side, it was expected that increase price of subsidized oil would downsize import of oil; because so far one of the main cause of deficit was oil import, but still it depended on domestic demand. As flashback: demand for oil rose drastically at home with increased number of private vehicles.
Economist circles still believed Indonesia’s trade balance would score surplus although still depending on global or domestic economy. In short it was not just the export factor but also import of capital goods lessened to a great extend might cause trade balance to score surplus. As known, it was most unlike that global economy would recover soonest so Indonesia’s economy would recover by 2014.
Still there were those who believed that trade balance would book surplus by 2014. The reason was that oil price increase by 33% would reduce fuel consumption by 5%. In that case need for imported oil would be down accordingly.
Today there was already signs of global economic recovery next year. For example Japan was predicted to be an Asian state quickly recovering after the Abenomics strategy was put in effect. Economic recovery in Japan would uplift Indonesia’s export volume by next year.
The conclusion was that till end of this year Indonesia’s trade performance would still be weak, but there was hope for recovery next year in line with economic recovery in Indonesia’s trading counterparts like the USA, South Korea, China, Thailand and Japan. In case of Europe, it was expected that Indonesia’s export to England, France, Holland and Germany could increase positively whereby to mend Indonesia’s poor trade balance. (SS) 

Business News - July 24,2013   

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