Wed, 29 Nov 2000

East Java exports reach the highest rate ever

SURABAYA: During January to September this year, East Java's export rate increased 38.85 percent. The total volume of exports reached more than 300 million tons worth US$3.8 billion. According to Kresnayana Yahya, a statistician, it is the best rate ever. The monetary crisis and the depreciation of the rupiah could be the main reasons for the success story.

But there are other factors too. "Industry in East Java is consistent with products that are in demand. Despite the crisis, it has succeeded in maintaining the continuity of production," explained Agus Hariadi, head of the foreign trade section at the East Java Department of Industry and Trade.

It is not an easy job for exporters, because to maintain continuity of production they must have access to raw materials. The problem is, a lot of raw materials needed for industry in East Java are imported from other regions/provinces, as well as from other countries. As Hariadi explained, East Java's export products are resource based; topping the list are marine and agricultural products.

"Actually, our strength is that we have a rich variety of export products. There are more than 1,500 kinds of export products from East Java," said Hariadi. These products are exported to some traditional markets like Japan, Singapore and the U.S. "But recently we have been developing new markets. Now there are more than 140 other countries to which we export," added Hariadi proudly.

The main export products are paper, household wares, wood, marine products, copper, footwear, chemicals, plastics, tobacco, coffee, tea and spices. East Java is also different from other provinces in Indonesia, some of which are richer in natural resources, because the province's products have added value. For instance, East Java exports finished products such as furniture rather than logs or rattan. It also exports fashioned jewelry rather than pure gold.

Export obstacles

But exporting does not just entail selling to foreign countries. It includes importing raw materials, producing, delivery, transportation, banking, insurance, etc. Rudy Wicaksono, chief of the foreign trade section at the East Java Chamber of Commerce (Kadin), is concerned that export activities are dominated by foreign investors. "Our small industrial entrepreneurs are still being left behind," he said.

To reduce the gap, East Java Kadin initiated an e-commerce campaign. "We want to educate small entrepreneurs in the regions about electronic trading." But such a program needs support, especially from local governments. "Without any attention from the government, it won't work," said Rudi.

In Rudi's opinion, there should be less exhibitions and trips abroad by government officials. They are costly and there is no guarantee of effectiveness. The budget from the annual regional budget (APBD) that normally goes to this kind of activity should be directed at the education and training of small entrepreneurs to enter the global and open markets.

Another obstacle that should be considered is the fact that East Java's export products rely on natural resources. "In the long term, the prospect is not good, especially if we are too dependent on raw materials from other regions or other countries," said Kresnayana.

To make furniture for export, East Java imports wood and logs from Central Java and Kalimantan, and to export paper products, some raw materials are imported from other countries. According to Kresnayana, East Java should follow other provinces, like West Java and Jakarta, in exporting knowledge and technology-based products.

Rudi Wicaksono agrees. "These kinds of products can compete in the global and open markets in the 21st century. It is important for everybody to know that transfer of knowledge and technology is as important as collecting money (devisa) and creating job vacancies."

But the most difficult problem to handle is transportation. According to Kresnayana, 97 percent of ships are owned by foreign companies. He is not surprised that there are not many people interested in investing in transportation. "There were too many regulations, paper work and fees in the New Order era. It was simpler to just rent foreign ships to deliver our export products."


However, there are still good prospects for some traditional export products and some new products. Among the newly developed products are wooden household wares. "There is a significant increase in exports of wooden household wares," Kresnayana said. This is interesting because the raw materials for these wares have very little value. Wood scraps, coconut trunks and coconut husks. With a creative design, products made from these raw materials now sell well.

"It proves that design matters. Our gold also sells well as designed products," added Kresnayana.

The role of trade sections in Indonesian embassies have been questioned, not only by Kadin, but also by Kresnayana, who is also a member of the Indonesian Managers Association.

"For all those years, trade sections have not functioned as expected. Most foreign trade is done directly by the traders/exporters, without the involvement or the help of the trade section," said Kresnayana. Rudi Wicaksono suggested that trade section in embassies be abolished. "Or they should be a combined team of government officials and experienced exporters. They (the exporters) are the ones who know where to sell the products, how to create new markets, and to innovate new export products," said Rudi. (Sirikit Syah)