Exports estimated to rise by mere 1 percent this year

JAKARTA (JP): Minister of Trade and Industry Rahardi Ramelan predicts another difficult year for the country's exporters, choked by Indonesia's debt quandary and the gloomy world economic outlook.

He said on Thursday that exports were projected to grow a mere 1 percent to US$43.4 billion this year.

"There are two sides of the coin when it comes to making a plan. We must be conservative but we must not set our target too low to allow ourselves to be complaisant," he told a media briefing.

Rahardi said the global economy was expected to grow only 2.2 percent this year, while the domestic economy's growth would improve to between minus 3.4 percent and zero percent, compared to a 16 percent contraction in 1998.

On the favorable assumption that inflation would linger from 15 percent to 20 percent and the exchange rate would hover around Rp 7,000 to Rp 8,000 to the dollar next year, non-oil and gas exports would rise slightly by 4 percent to 5 percent this year to about $45 billion, he said.

Even with such heartening progress, economic uncertainty would dog the country in 1999, he added.

"If we can reach 5 percent growth in non-oil and gas exports next year, we will thank God."

Rahardi said exports would not sharply rise this year because industries' utilization of production capacity would remain as low as last year.

Even if new investors start production in 1999, they would be unable to fully utilize their total production capacity, he said.

Better economic indicators might allow some companies to slightly increase production in 1999.

In 1998, domestic utilization of production capacity in the industrial sector declined to 62.4 percent, he said.

The agricultural and forestry sector used 75.3 percent of its capacity, various industries 62.1 percent, and the metal, machines and chemical industries 42.4 percent, he said.

The worst-hit transportation sector, including the automotive industry, now only utilized 15.5 percent of its total production capacity, he said.

In the January-September period of 1998, export value dropped by 6.88 percent year-on-year to $41.02 billion, while imports dropped by 336 percent to $22.55 billion.

Oil and gas exports rose by 32.13 percent to $6.56 billion, and the non-oil and gas exports were up by 0.22 percent.

Rahardi listed the problems besetting the economy in 1998.

The rupiah's depreciation caused prices of imported materials to soar, especially in the manufacturing sector.

Concurrently, products with high local components, such as agroproducts and mining, were sensitive to price fluctuations.

High lending rates and high inflation had made it hard for the private sector to finance operations, and the banking crisis made international banks reluctant to accept letters of credits issued by the local banks, he said.

Declining imports caused a scarcity in containers, and a sweeping economic crisis across the region slashed the buying power of importers of Indonesia's products.

Continual social unrest upset the flow of delivery in 1998 and discouraged foreign buyers from continuing deals. (das)