Recession, price drops cause decline in exports
JAKARTA (JP): The world economic recession, the depressed market of primary commodities and the inability to export more higher value-added products are the major reasons behind the decline in Indonesia's non-oil exports over the past few months, experts say.
Minister of Trade Satrio B. Joedono told a seminar on "The impact of General Agreement on Tariffs and Trade (GATT)/Uruguay Round talks on the business world" that although Indonesia had developed wide export markets for its products, falling prices have decreased its export earnings.
Economist Suhadi Mangkusuwondo said the depressed market of primary commodities, which accounted for 30 percent of Indonesia's total exports, had contributed to the decrease in the country's exports.
"Red-tape however, is still the main reason that Indonesian exports are less competitive on the international market," he said.
Economist Dorodjatun Kuntjorojakti, who is also dean of the Faculty of Economics at the University of Indonesia, said that although red-tape and the recession should be blamed for the export decline, Indonesia's unreliable delivery system was another cause for the slackening exports.
"The current market trend has increased the competition not only in terms of price and quality, but also of the reliability of delivery," he said.
Dorodjatun explained that the "life cycle" of a product was now much shorter than it was before. Certain countries which owned modern transshipment harbors, such as Singapore, could easily take advantage of the efficient transportation system.
"Inadequate port facilities are serious obstacles to the growth of our exports," he warned.
Change
According to Dorodjatun, another cause for the export setback was the changing characteristic of world trade, in which companies dealt with each other under intra-company transactions.
"It seems that we are now entering a new pattern in which investment generates trade and not vice versa," he said.
He explained that in the past, trade barriers in various countries encouraged multinational companies (from industrial countries) to build plants overseas.
"This won't continue because tariffs in the industrial countries have been lowered. But because these multinational companies have already set up their plants around the world, new issues related to copyright and intellectual property rights have emerged," he said.
These problems, in turn, resulted in the need for new rules -- which are the Trade Related Aspects of Intellectual Property Rights (TRIPs) and the Trade Related Investment Measures (TRIMs) -- to be included in the GATT agreement, he said.
"So there seemed to be a kind of "conspiracy" that caused trade regulations such as TRIPs and TRIMs to be issued," he said.
Preparation
According to Joedono, Indonesia now has to prepare for a world economic recovery. The U.S. economy, for example, is now growing robustly and Europe is showing signs of strong recovery as well.
"Therefore new deregulation and bureaucratic reform measures are urgently needed," he said.
Suhadi said that Indonesia's business world had no other choice but to prepare themselves to meet GATT regulations. "They have been given enough time to do so," he said.
He added, however, that the business world should be well- briefed on the technical details of the GATT rules and on the procedures for their enforcement.(pwn)