Exporters yet to benefit from rupiah's sharp fall

JAKARTA (JP): The sharp depreciation of the rupiah against the U.S. dollar will not make Indonesian products more competitive because of their high import content, an economist said.

Economist Sri Mulyani Indrawati of University of Indonesia said that the sharp drop in the rupiah could not offset the increase in the production costs stemming from the increase in the capital spent importing raw materials.

According to the university's research, each time the rupiah depreciates by 1 percent it should boost exports by 0.4 percent to 0.6 percent.

But Indonesia's main exports, such as textile and textile- related products and electronics, depend highly on imported raw materials.

Speaking at a seminar on the prospects of Indonesian exports in the free trade era, Sri said that besides the high import content, the inefficiency of the country's industrial companies was also due to the weakness of economic activities such as high interest rates, a tedious bureaucracy and red tape.

China also has a laborious bureaucracy, high tariffs, and high interest rates but its products are more competitive than Indonesia's in the foreign market.

"China's exports have grown 25 percent as of September. It was surprising because its products were more competitive than other countries whose currencies had sharply depreciated," she said.

The monetary crisis, triggered by the defacto devaluation of the Thai baht in early July, has caused a drop in the value of the rupiah by about 60 percent against the U.S dollar.

She said that Indonesia should focus on improving its resource-based industry, such as agribusiness which does not depend on imported raw materials.

The director general of international trade, Djoko Moeljono, said that despite the economic crisis, Indonesia's non-oil exports reached US$30.82 billion -- or increased by 10.27 percent as of September -- compared to the same period last year.

He said that the government expected the country's exports to increase to US$43 billion in 1997 from $40.6 billion last year.

"We expect our exports will reach about US$50 billion next year."

He said that the government has attempted to boost exports during the economic crisis, such as allocating Rp 3 billion for cheap loans to help export-oriented small and medium companies.

Indonesia's main non-oil exports include textiles and textile products, garments, plywood, rubber, shrimp, copper ore, and coal.

The country exports most of its products to Japan, the United States, Singapore and European countries. (gis)