Trade Ministry Urges MSMEs to Export Amid Rupiah Weakness

The Ministry of Trade (Kemendag) has urged micro, small and medium-sized enterprises (MSMEs) to seize export opportunities amid the rupiah’s depreciation against the US dollar. The rupiah exchange rate on Thursday morning (21 May) weakened by 1 point, or 0.01 percent, to Rp17,655 per US dollar, from a previous close of Rp17,654 per US dollar. Ari Satria, Director of Export Development for Services and Creative Products at Kemendag, in Jakarta, said the rupiah’s weakness makes export prices more competitive and cheaper for buyers or overseas markets, potentially boosting foreign demand. ‘Theoretically, indeed, with a weaker rupiah our goods should become more competitive,’ Ari said. In general, when the domestic currency weakens against major foreign currencies like the US dollar, exporters’ revenue in rupiah will be larger when converted. Exports priced in US dollars likewise become cheaper on international markets, which should potentially stimulate higher demand from destination countries and improve competitiveness. However, Ari emphasised the importance for entrepreneurs and exporters to manufacture their goods using locally sourced inputs. He considers this crucial so that profits are not eroded, because using imported inputs would have the opposite effect. ‘Unless for products that rely on imported inputs, it may also be difficult to increase exports since price increases would be eroded by higher imported input costs,’ Ari said. ‘If these inputs are 100 percent local, then it should be able to grow further going forward,’ he added. Regarding the impact of recent rupiah depreciation against the US dollar on MSMEs, Ari said there has not yet been a significant effect felt. ‘The rupiah depreciation has only been a week; its impact is not yet visible. Perhaps if colleagues engage in export activities, the effects may become apparent two months or three months ahead,’ he said.