Exports remain uncompetitive despite crisis
JAKARTA (JP): Indonesia's exports have remained uncompetitive overseas despite the sharp drop in the rupiah's value against the U.S. dollar, an executive has said.
The chairman of the Association of Garment Suppliers, Poppy Dharsono, blamed yesterday the poor performance of the country's exports on inconsistent government export policies.
"From what I observe, the government focuses too much on currency issues, instead of using the fall in the rupiah as a momentum to strengthen our exports," Poppy said after an economics seminar.
"There are plenty of opportunities now and they might not come again," she said.
She said the government lacked "business sense" and had established ineffective economic policies.
She cited the government's recent plan to establish a currency board system, which would peg the rupiah to a foreign currency at a fixed exchange rate, as an example of the government's poor business judgment.
"Before we ever establish such a board we must improve not only our banking sector, but also our real sector to increase our foreign exchange reserves," she said.
Poppy said the government has not paid enough attention to the real sector, businesses outside of the finance sector, since the crisis began last July.
She explained that garment suppliers, for example, were burdened by the fact that they have to pay for their raw materials in dollar-denominated cash, although the materials were locally made.
The raw material suppliers are seen as unreliable because deliveries often come later than the promised date, she said.
Some garment companies pay extra for their materials to be shipped by air in order to receive them on a timely basis.
"Materials are now locally made, but we may as well import them rather than spend dollars on locally made products which are often delivered late," she said.
The situation has caused many garment producers to go bankrupt, especially those with revenues in rupiah, because they cannot afford to pay for their materials in dollars, she said.
Many garment companies need additional working capital to buy new material because their existing supplies will only last until April, she said.
"The profit margin of garment suppliers is very small. Our profit is about 6 percent to 7 percent of our revenue, because if we try to make larger profits, we would lose business to other countries such as China," she said.
The crisis should provide an opportunity for export businesses, but the appreciation of the dollar by over 300 percent against the rupiah has made raw materials very costly, she said.
The government also has burdened exporters and importers with high taxes and import duties, while its officials have often collected illegal levies from the companies, she added.
The government should focus its attention on efforts to boost exports, Poppy said. (das)