Fears of political uncertainty keep exports subdued

JAKARTA (JP): Indonesia's political uncertainty continues to scare away foreign buyers of the country's major non-oil and gas export products, according to exporters.

Exporters expressed concern yesterday over the fact since the rupiah's sharp plunge against the U.S. dollar should have boosted non-oil and gas exports.

"We can't take advantage of our export competitiveness resulting from the rupiah's sharp depreciation due to the domestic political instability," said chairman of the Indonesian Footwear Association (APRISINDO) Anton J. Supit.

He explained that foreign buyers had turned to other exporting countries because they were afraid that Indonesian exporters would fail to deliver their products on time.

"Products like shoes, garments and children's toys are fashion and seasonal products, in which a timely delivery is very important," he said.

He forecasted that shoe exports in 1998 would decline at least 25 percent from last year's US$1.9 billion level.

He added that the export value for the first quarter of this year had dropped about 50 percent from the same period in 1997.

"We hope this political infighting can be settled as soon as possible," he said.

The secretary-General of the Indonesian Textile Association (API), Irwandy M. Amin, shared Anton's opinion, saying that May's bloody riots had scared away foreign buyers.

He, however, added that since most factories had not been damaged during the unrest, some foreign buyers had started to reenter the country.

He predicted that textile exports would decline between $1 billion and $1.5 billion in 1998 from $7.3 billion last year, mainly due to the political instability.

The difficulties in obtaining imported raw materials due to rejections of Indonesian letters of credit (L/Cs) by overseas institutions were also another big problem for exporters, Irwandy said.

He said that a guarantee scheme provided by several foreign donors and Bank Indonesia had not been effective because local banks required exporters to submit 100 percent in cash to open an L/C.

A $250 million trade financing guarantee provided by the Australian government, for instance, was only 50 percent utilized because of the deposit requirement, he said, adding that a second stage amounting to $250 million might not be used because of high insurance fees demanded by the scheme's insurers.

Overseas banks started to reject the country's L/Cs due to a loss of confidence in local banks, especially following the closing down of 16 banks in November.

The government signed a memorandum of understanding (MOU) with 21 domestic banks last month to provide Rp 2.5 trillion in export loans, but exporters have said that details of the facility have yet to be finalized by the banks and the government.

"We hope this can be implemented soon so that we can focus on dealing with the domestic political instability," Anton said.

Handling fee

APRISINDO, API, the Indonesian Importers Association (GINSI) and the Indonesian Exporters Association (GPEI) yesterday lambasted a decision made by Tanjung Priok Port authorities to increase loading and unloading fees an average of 32 percent.

They claimed the increase was unlawful.

GINSI chairman Amirudin Saud said the fee increase was agreed to on July 30 by Tanjung Priok, the Association of Loading and Unloading Companies (APBMI), the Indonesian Shipowners Association (INSA) and the Indonesian Forwarders Association (GAFEKSI).

"Based on a 1991 ministerial decree, GINSI, API, APRISINDO and GPEI must also be allowed to be involved in the decision-making process since we are the owners of the goods," he said.

He urged the Ministry of Communications to cancel what he termed as the unlawful decision and to investigate Tanjung Priok administrator Aprildo Abidin for possible collusive practices in the decision.

Amirudin also said Abidin had slashed port labor wages from Rp 15,000 per day to Rp 4,000 per day. (rei)