Imports up in July, reversing declining trend

A'an Suryana, The Jakarta Post, Jakarta

Imports were up in July, reversing the declining trend for most of the year amid falling investment.

But analysts said this was not necessarily a sign of returning investment in the country.

The Central Bureau of Statistics (BPS) said on Monday that imports in July had increased by 8.09 percent to US$2.60 billion from $2.4 billion in June. On an annual basis, imports were up 6.1 percent.

BPS chief Soedarti Surbakti said the increase in imports were mainly driven by the rising demand in capital goods, such as machinery.

While in theory the increase could indicate that new investments had been taking place in the country, Standard Chartered Bank economist Fauzi Ichsan said it was too early to jump to such conclusions.

He said that the higher imports was probably because companies wanted to replace old machinery to maintain current production levels.

Fauzi explained that if the rising imports of capital goods continued for six months, then it could be concluded that new investments had returned to the country.

Investment has been falling due to various uncertainties, including labor conflicts, legal uncertainty and security fears. During the first semester of this year, foreign direct investment fell by nearly 50 percent compared to the same period last year.

Earlier reports said that many foreign companies had relocated their operations to other countries in the region which offered a better investment climate.

Investment is a crucial factor to push economic growth. So far, economic growth has been relying on domestic consumption as both investments and exports have been weakening.

BPS also said that exports in July dropped 1.2 percent to $5.01 billion compared to June levels.

The sharp increase in imports and lower exports caused July's trade surplus to fall 9.4 percent to $2.41 billion from a month earlier.