Government plans to shift exports from faltering traditional markets to new non-traditional markets to sustain export growth despite weakening global demand may be on track, a senior official says.
Deputy to coordinating minister for the economy, in charge of industry and trade, Edy Putra Irawady, said the latest export figures indicate that half of the country's exports would shift to new markets by the end of the year.
"I'm optimistic this year we can start *to shift* half of our exports *to new markets*, so long as that all our policies work simultaneously," Edy said Friday.
The key factor in ensuring the success of the plan, he said, was the Indonesian Exports Financing Agency (LPEI), which is expected to be in full operation in July.
Indonesia exported US$26.9 billion worth of non-oil-and-gas products between January and April, 32.24 percent of which was sold to China, the US and Singapore, according to latest data by the Central Statistics Agency (BPS).
The January-April exports fell 22.68 percent from $34.79 billion in the same period last year.
The Indonesian Chamber of Commerce and Industry (Kadin) has said Middle Eastern, Latin American and African countries represent lucrative yet largely untapped markets. Only by exploring new markets, Indonesian exporters can make up for weakening demand in most traditional markets.
According to the Trade Ministry, Indonesia will compete with China, Malaysia, Thailand, Taiwan, Japan, Vietnam and Singapore in exports to Middle Eastern countries.
Edy said Indonesia had several key commodities to be exported to new markets. "If we see from the type of commodities, there are foods, shrimp, crude palm oil (CPO), rubber, textile. Now we can directly export them to Russia or Eastern Europe."
The value of Indonesia's exports may contract 20 percent this year, while volume may fall between 5 and 10 percent, Trade Minister Mari Elka Pangestu said on June 19. But she added the recent pickup in commodity prices would eventually boost exports, to help bring economic growth up to about 4.5 percent.
"Indonesia is the world's largest producer of palm oil. The country has begun trading physical contracts today on the Jakarta Futures Exchange, aiming to compete with price-setting centers in Europe and Malaysia, and may switch from Rotterdam to Jakarta for the reference prices," said Bayu Krisnamurthi, the deputy to the coordinating minister for the economy, in charge of agriculture and maritime affairs.
Edy said LPEI has been set up to fill export financing needs that cannot be met by commercial banks.
"LPEI is mainly expected to finance export products produced by micro, small and medium-sized industries (MSMEs), and has already started work with six regions. LPEI will also be responsible for expansion of products to new markets, like services, construction and technology, worth hundreds of millions.
"And LPEI will bridge *trade financing needs* to countries whose currency is not easy convert, for instance Iran and Russia. LPEI will guarantee if there is a default on the importer's side," he said.
He added that demand would increase starting from September, which would boost exports, as the global economic downturn might bottom out in the first half this year.