Non-oil trade to suffer deficit

Non-oil trade to suffer deficit

JAKARTA (JP): Indonesia's non-oil trade balance this year will likely deteriorate to deficit levels reminiscent of the 1980s, a noted economist said here yesterday.

"It will be difficult to compensate for the shortfall by the end of this year as our non-oil trade deficit reached US$3.1 billion during the first nine months," said Suhadi Mangkusuwondo, a former foreign trade director general at the trade ministry.

Data from the newly-formed Ministry of Industry and Trade show that during the first nine months of this year, Indonesia's exports of non-oil products reached $25.2 billion, indicating an increase of 14.4 percent over the same period of last year.

But its non-oil imports during the first nine months of this year reached $28.3 billion, up 32.4 percent from the corresponding period of last year.

He pointed out that this year's total exports, including oil and natural gas, amounted to $32.9 billion and total imports $30.4 billion for the nine months until September.

But Suhadi, a economics professor at the University of Indonesia, pointed out that there is little need to worry if the import growth is due to an increasing demand for capital goods and raw materials at home.

"Imports of goods that are used in manufacturing activities will in two or three years spur the growth of exports," he was quoted by Antara as saying.

He said that Indonesia is not alone in that matter. Malaysia and Thailand also saw their imports of capital goods and raw materials increase as a result of rapid investment growth.

"The rapid growth of imports of capital goods and raw materials has to do with increasing capital inflows," he said.

He said, however, that if the imports of consumer goods drastically increase, then "we should pay serious attention to the trend".

The government's decision to tighten the regulations on non- bank finance companies, he said, is the right way to improve the country's balance of payments.

The government recently closed non-banking financial services -- such as leasing, factoring, credit card and consumer financing -- to newcomers and subjected the eligible 253 financial companies to tighter regulations.

The new ruling also imposes new lending and borrowing restrictions on financial companies, who Suhadi blamed for the sharp increase in short-term foreign borrowing.

"In this case, the government should control the inflow of short-term loans to prevent a situation similar to the 1994 Mexican financial crisis," he said. (13)