Govt export target gets cautious response

Dadan Wijaksana, The Jakarta Post, Jakarta

A relatively weak currency and a likely recovery in the global economy next year could mean the government's 5 percent growth target for non-oil and gas exports is realistic, economists said, but added that much depended on a recovery in the U.S. economy.

Bank Mandiri chief economist Martin Panggabean told The Jakarta Post that sales of non-oil and gas exports in 2002 would be able to grow by 5 percent.

"The (5 percent) target should not be too hard to meet because our products remain competitive under a weak rupiah, while demands are expected to rise on the back of a probable speedier recovery among developed countries," Martin said over the weekend.

He was responding to the government's non-oil and gas export growth target of 5 percent next year, which Minister of Industry and Trade Rini Soewandi said last week was a feasible target.

Boosting sales, he said, depended on economic recoveries in the U.S. and Japan, both of which are Indonesia's largest export markets.

As for the rupiah, the currency's current levels have made Indonesia's export commodities more price competitive, he added.

Export sales in September grew by 4.21 percent after falling for two straight months since June.

Sales for that month totaled US$5.1 billion, with non-oil and gas exports sales reaching $3.9 billion, or close to a 4 percent rise compared to the month before. In the nine months to September, exports hit $43.7 billion, which is, however, $2.78 billion less than sales over the same period last year.

Still, the outlook could be improving considering last week's report that the U.S. economy grew substantially faster during the third quarter.

The U.S. gross domestic product (GDP) grew by a 3.1 percent annual rate during the third quarter, compared to 1.3 percent during the previous one. The GDP measures the total value of goods and services produced by a country in a year.

However, the latest data on massive job cuts in the manufacturing sector suggest that the faint recovery in the U.S. might be weakening instead.

Citibank economist Anton Gunawan, while citing the 5 percent target as realistic, warned of potential problems arising from higher risk premiums on shipping in and out of the country.

This higher risk premiums were imposed by the international reinsurance market following the Bali bombing.

Anton argued that a more expensive premium would eventually inflate the price of Indonesian export goods, making them less competitive.

"The government has to watch out, although I don't think the impact will be all too damaging to our overall export sales," Anton said.

Following the Bali blasts, Indonesia was included on a list of potential war zones, resulting in higher risk premiums for every ship traveling in and out of the country.

Export sales contribute to about 9 percent of the nation's economic growth, while the other growth engines are investment and domestic consumption.