Indef: Export structure must shift to industrial value-added basis

Jakarta - The Head of the Macroeconomics and Finance Centre at the Institute for Development of Economics and Finance (Indef), M Rizal Taufikurahman, has stated that Indonesia’s export structure must be transformed from a raw commodity base to one driven by industrial value addition. The statement was made in response to Indonesia’s trade balance recording a deficit of 1.61 billion US dollars in May 2026, ending a 72-month run of consecutive surpluses since May 2020. “The key is not merely increasing export volume, but changing the export structure from a raw commodity base to one based on industrial value addition. Otherwise, every time commodity prices fall or energy imports surge, Indonesia’s trade balance will become fragile again,” Rizal told ANTARA in Jakarta on Sunday. Rizal argued that the trade deficit signals that Indonesian exports remain vulnerable to weakening commodity prices and rising imports. He noted that potential commodities going forward must still rely on non-oil and gas sectors, as their contribution reached 110.19 billion US dollars, or 95.5 percent of total exports from January to May 2026. However, Rizal stressed that the export focus needs to shift away from coal and crude palm oil. Exports must be driven by value-added products such as downstream nickel, iron and steel, palm oil derivatives, agriculture-based basic chemicals, semi-finished aluminium, fisheries, coffee, cocoa, spices, furniture, technical textiles, footwear, automotive products, and electronic components. “BPS also recorded that the increase in non-oil and gas exports from January to May 2026 was primarily driven by the processing industry, including processed nickel, palm oil, agriculture-based organic basic chemicals, inorganic chemicals, and semi-finished aluminium,” he added. On the other hand, Indonesia’s export market strategy is considered to need broadening from traditional markets towards South Asia, the Middle East, Africa, Latin America, and intra-ASEAN trade. Rizal explained that Indonesia’s non-oil and gas export destinations are currently still concentrated on China, Japan, and Australia, making them vulnerable to any demand slowdown or geopolitical disruptions in key regions. “The government needs to strengthen trade diplomacy, accelerate PTA/FTA negotiations, provide export financing, standardise ESG and traceability, and aggregate exporting MSMEs so that Indonesian products can enter new supply chains being formed due to global fragmentation,” Rizal stated.