Fall in export growth<\/p>\n
Indonesia, accustomed to annual growth rates of 17 percent to
\n20 percent in the exports of non-oil products over the past
\ndecade, should be greatly concerned at the downward tendency in
\nits export expansion since early this year. Preliminary figures
\nshow that in the first six months non-oil exports grew by only
\n6.7 percent, as against the robust growth of more than 16 percent
\nthroughout last year.<\/p>\n
Some optimistic trade officials simply see the trend as a
\ntemporary downward cycle that has depressed the prices of
\nIndonesia's major export commodities. But this observation seems
\ntoo optimistic as almost all key indicators point to a
\nsignificant pick up in the world's economic performance this
\nyear.<\/p>\n
Many economists, including those within the government, are
\napprehensive that some more fundamental reasons lie behind the
\nslackening export growth. The fact that the fall seems more
\napparent in such light industrial products as textiles and
\ngarments and sporting shoes indicate that fiercer market
\ncompetition, rather than weakening market demand, could be a
\nmajor reason.<\/p>\n
The latest developments further portend a worrisome trend in
\nthat even the products of such resource-based enterprises as
\nplywood might fall way below their export records of more than
\nUS$5 billion last year. Most plywood companies are lowering their
\nestimates of profits for this year due to the combination of
\ndeclining prices and heavy-handed marketing measures by
\nIndonesia's sole export agency -- the Indonesian Wood Panel
\nAssociation (Apkindo) -- that apparently have disgusted importers
\noverseas.<\/p>\n
This trend should cause great concern indeed because plywood,
\ntextiles and garments last year accounted for almost 40 percent
\nof the nation's total non-oil exports. Further down the line,
\nnon-oil products now account for more than 70 percent of the
\ncountry's total export earnings. Since manufactured products now
\nsupply over 70 percent of non-oil exports, a declining growth
\nrate in this sector has other far reaching implications on
\nemployment and tax revenues.<\/p>\n
Many economists share the view that Indonesia's light
\nindustrial products have now become less competitive on the
\ninternational markets due to the entries of new suppliers which
\noffer lower prices. In fact, an increasing number of foreign
\ninvestors who relocated their labor-intensive plants to Indonesia
\nsoon after the massive deregulation measures in the latter part
\nof the 1980s have also been complaining about the diminishing
\nedge on their competitiveness.<\/p>\n
The problem is that the competition in the international
\nmarket for such products as textiles, apparel, canvas shoes,
\ngloves, toys and electric appliances has now become so fierce
\nthat producers have only a razor-thin margin. Even the slightest
\nrise in production costs will impair their price competitiveness,
\nwhile prices are the most crucial factor in the marketing of such
\ngoods.<\/p>\n
It might be true enough that Indonesia could be losing out to
\nother lower-cost producers, such as India, Pakistan, Bangladesh
\nand China, in several labor intensive products. But given the low
\nminimum wage of only about US$2.50 a day, we find it hard to
\naccept that Indonesian labor costs are no longer competitive.<\/p>\n
Instead, we suspect that the other costs incurred in the
\nimportation of basic materials, port handling, land
\ntransportation, export and regulatory paperwork processing may be
\nmuch higher compared to those in other countries. Efficient port
\nhandling, land transportation and expedient paperwork are crucial
\nfor most of the export-oriented enterprises because they are
\nindustries that depend largely on imported materials and
\nintermediate goods. They require fast tracks of imports and
\nexports to reduce inventory and capital costs.<\/p>\n
The government, we think, should thoroughly investigate the
\nproblem through meaningful dialogs with businessmen. Perhaps the
\nissue is no longer related to a lack of deregulation, but instead
\nhas to do with the extremely inadequate enforcement of the
\nnumerous packages of reform measures introduced since 1985.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fall-in-export-growth-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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