One of the economic problems that called for the
Government’s extra attention was to minimize deficit of trade balance. This was
not an easy task amidst low global demand for products and contracting economy
in China, America and Europe. It seemed reasonable that the Government
predicted Indonesia was still be having trade deficit through Semester II-2013
especially in the oil gas sector.
Trade
Minister Gita Wirjawan predicted deficit in trade balance would increase to USD
5 or 6 billion in 2013. During first semester of 2013, deficit of trade balance
was posted at USD 3.3 billion on account of import of oil gas 5.8 billion and
surplus of non oil gas commodities USD 2.5 billion.
In case
of the non oil-gas sector it was still predicted to be in surplus in this
Semester II which was estimated at USD 2,3 billion. Minister Wirjawan added on
that reduce deficit from oil-gas import would be seen after the Government
increased price of subsidized oil. On the other hand the Government had adopted
the policy of putting added value on exported mining products.
However,
the policy would only be felt of its effect after a long time, considering
stagnation and contraction of global economy including Europe, China and the
USA. Those were the factors which would reduce deficit and safeguard Trade
Balance of Semester II/2013. However it should be underscored that the
prevalent factor of the trade balance was oil-gas, especially to consider that
the Government had imported USD 13 billion worth of oil in Semester I/2013.
Based
on the prediction that Trade Balance would increase in Semester II this year,
the Government would strive to downsize deficit by jacking up export. The
effort to prevent deficit from swelling in Semester II this year was by
applying Cost Insurance Freight [CIF] system and Freight on Board [FOB] system
i.e. export process managed by importer country. Change of FOB to CIF would be
effective as per August and to be reported in October.
Deficit
was continuing to happen as shipment was on FOB basis. In June 2013, data of
BPS had it that Indonesia’s trade balance was posted at USD 846.8 billion. That
deficit was because Indonesia’s export was only worth USD 14.74 billion against
import which was posted at USD 15.5 billion. Accumulatively through
January-June 2013 posted deficit of USD 3.31 billion, while export was USD
91.06 billion and import USD 94.36 billion.
The
breakthrough in export procedure was expected to jack up Indonesia’s export
amidst pressures of trade balance in the last few months. As knows import
procedure was already on CIF basis, while export was on FOB basis.
The
principle of FOB procedure was export only included value up to the stage of
loading on board while the CIF system calculated value of goods, shipment cost,
till goods delivery. Apparently export registering by CIF was more valid.
For the
initial stage, most probably CIF would be applicable on small scale or limited
to certain commodities like export of CPO, cacao, rubber and coal. Preparations
for change of procedure from FOB to CIF was beginning to be discussed at
directorate general Level.
Implementation
of the CIF system would overcome deficit in trade balance which was the culprit
of troubled current transaction. It was believed that the CIF method would
increase export value by USD 5-10 billion till end of year and cover up deficit
in trade balance of the last six months. The inclusion of shipping, insurance
and banking sectors in calculation was believed to minimize deficit in current
transaction.
All
business players had no objection to excise this new method after signing of
MoU on the application of CIF with the Government on February 2013. For over 5
months business associations together with the Government had been managing
data of product and transportation method for product to be exported by CIF
method. Buyers abroad had no objections to the application of the new method
although they were accustomed to using FOB method when buying products from
Indonesia.
Ship
liners would focus attention on transporting commodities of higher sales value
like CPO and coal for the early phase of application of the CIF method. This
method would be good catalyst for the shipping industry and had the potential
of offer profit of Rp150 trillion each year. The change of trading scheme from FOB
to CIF would jack up growth of export-import load transported by Indonesia flag
carriers up to 25% by end of 2014.
However
the Association of Indonesian Coal Miners stated that application of trading
system depended on the agreement between buyer and seller. Indonesian exporters
could not force application of CIF system if buyers demanded application of FOB
system. For that matter the Government, in this case the Ministry of Trade must
make approaches to this type of buyers to convince them of the positive side of
the new system.
About
accusations that the CIF system was but a trick to hide export failure, was
denied by the Ministry of Trade Gita Wirjawan. According to Wirawan, the main
objective of export recording scheme was involve ship liners, insurance
agencies and financial institution in Indonesia in overseas trading activities,
although this new scheme could only be expected to jack up export value and
turn trade balance from deficit to surplus.
In the
end there was no reason for export not to use the services of financial
insurance and domestic transportation. To illustrate, if the new scheme of
export recording had been put in the last 5 months of 2013, state’s income from
export could have soared to USD 8 billion. This was due to extra income of
5%-10% from the services sector, i.e. insurance and shipping of local liners.
There
would be increase by calculation, but the most important thing was increase of
export it self in reality. It seemed right if the National Export Development
Board, the Ministry of Trade conducted annual meeting with the heads of
provincial trading dept all over Indonesia and Heads of the Regional Export
Traing Centers to call out regional Government to increase export of products
of adde value.
The
forum was meant to synchronize perception and common understanding of export
policy makers in the capital city and in the regions. Through this from many
parties were expected to take benefit, especially the provinces which were
short of information related to export development program of the Dir. Gen Pen.
This forum could also form a sound working network between the central and
local government in the effort to promote export nationwide.
In this
case the strategy of product diversification was exercised by adding more products
to the 10 premium commodities of non oil gas export category. The products to
be developed were products of high added value based on creative economy. The
product development was being exercised by way of design development, packaging
design, branding and distribution.
It was
important to pay attention to small business [UKM] to promote their export
capacity. Contribution of the UKM sector to national export from 1998 to 2012 was
on the average still less than 20%. And yet according to the Central Board of
Statistics [BPS], of all business sectors, small business was prevalent
[99.99%].
Some of
the handicaps encountered by UKM were measly capital, workers’ low competence,
poor access to banks, poor mastery of technology, lack of information and poor access
to the global market. Surely some small business were able to penetrate the
global market, but their position was vulnerable as they were uncompetitive.
Meanwhile
loan to Deposit Ratio of Indonesian banks was still around 75% so the potential
of financing increase could be significantly increased. By opening maximum
accesss to the UMK sector, export could be promoted to the maximum.
In this
case the measures taken by Exim Bank who constantly enhanced the role of UKM to
promote export was praiseworthy, as specified in Article 4 point of the law no
2/2009 on the Indonesia Export Financing Body [LPEI/Indonesia Exim Bank].
From
2010 to 2012, financing for small business in Indonesia by Exim Bank was Rp636
billion in 2010, Rp 1.739 trillion in 2011 and Rp2.352 trillion in 2012. For 3
years the average growth of financing for UKM sector in Indonesia by Exim Bank
was 134.89%. Indonesian premium commodities financed by Exim Bank were among others:
fruits and vegetables, fish products, forestry products, garments, furniture,
palm, rubber, and auxiliary products of the oil-gas industry and mining
industry.
Since
2009, Indonesia Exim Bank had been applying 3 methods in financing UKM
exporters. The first method was business-linkage financing strategy, i.e. the
strategy of development financing to UKM by enhancing business relations
between core corporate and supplier/vendor/contractor of UKM scale.
The
second method was re-financing and co-financing strategy i.e. financing of UKM
through services of banking network and Banking Financial Institution [LKB] and
Non-Bank-Financial Institution [LKBB] with financing portofilio to
export-oriented UKM.
The
third method was direct financing strategy i.e. direct financing by Indonesia
Exim Bank to the small business sector individually or collectively. By this
method, Indonesia Exim Bank would guide UKM exporter so they could be more
competitive and strong.
By the
three methods, Indonesia Exim Bank expected UKM exporters to grow and propel
Indonesia’s export. Indonesia Exim Bank was hoping to be involved more
intensively in developing potential UKM exporters to promote Indonesia’s
export.
Today
Indonesia Exim Bank UKM financing network had four outlets, i.e. the UKM
Financing Division at the Jakarta Headquarters, the Surabaya office, Medan
office and Makassar Office.
Business News - August 21, 2013
