Machinery exports sign of industry relocation

Machinery exports sign of industry relocation

Abdul Khalik, The Jakarta Post, Jakarta

Analysts warned on Wednesday that the increase in Indonesian
machinery exports as reported by the Central Statistics Agency
(BPS) could be due to relocation to other countries by foreign
factories rather than genuine export growth.

The chairman of the National Economic Recovery Committee
(KPEN) Sofjan Wanandi said that there was a strong possibility
that BPS recorded all machinery sent abroad as exports.

"There are no signs of an increase in machinery production in
Indonesia, especially before and during the general election
campaign. Businesspeople are still waiting for the result," said
Sofjan, who is the owner of several companies in various business
sectors.

Sofjan told The Jakarta Post that many foreign companies had
relocated their factories to Vietnam and China to seek lower
production costs and a better business climate.

During the past couple of years, a number of foreign ventures
have decided to stop their operations here due to the worsening
investment climate.

Johnson and Johnson, which manufactured various types of baby
and skin care products, closed its local operation on March 31,
2001.

In 2002, PT Indolin Utama Garment, the producer of various
brands of trousers, and PT Dosan Indonesia, the producer of Nike
shoes, stopped their production activities.

PT Sony Electronic Indonesia, a subsidiary of the giant Sony
Corp. pulled out of Indonesia in 2003, leaving around 1,100
workers out of work. The company said that it relocated its
business to Malaysia because that country offer a better
investment climate than Indonesia.

BPS reported earlier that Indonesia managed to book US$646.3
million in exports of machinery and electrical equipment in
February, up around 20 percent from $448 million in January.

BPS also said that export of such commodities experienced an
increase of $94.7 million to $1,095 million in the January-
February period of this year compared to the same period last
year.

Aside from this, BPS also reported a $78.5 million increase in
the export of mechanical equipment in February, up from $470.6
million in January.

An economist from the University of Indonesia, M. Ikhsan, said
that the high increase in machinery export raised suspicions that
many more foreign companies had pulled out of Indonesia and taken
their machinery with them.

"We must be careful in analyzing the BPS report because it
could show that more and more foreign companies have pulled out
of Indonesia. Every commodity sent out of Indonesia is recorded
by BPS as an export," he said.

Another analyst from the Institute for Development, Economics
and Finance (Indef), Bustanul Arifin, concurred.

"If the exports are registered outside Jakarta or other main
ports then we can say that the possibility of factory relocations
is even higher because there is no detailed examination of goods
at such ports," Bustanul told The Jakarta Post.

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