U.S. accounting woes threaten RI's exports: Businesses

A'an Suryana, The Jakarta Post, Jakarta

The local business community is worried that the current slide in the U.S. stock market, triggered by a string of major accounting scandals, will negatively affect Indonesia's export performance.

They said that the plunge on Wall Street could threaten the fragile recovery of the U.S. economy, one of Indonesia's major export markets.

"The direct impact has yet to be seen. But, if the bad mood continues, it would be dangerous (for Indonesia's exports) as the U.S. has been a main export destination for Indonesia," said Djimanto, an executive at the Indonesian Employers Association (Apindo).

Analysts earlier said if the U.S. stock market continued to weaken, it would hurt consumer sentiment and harms consumption, which is one of the main engines of economic growth in the U.S.

Nearly half of all U.S. households invest in the stock market.

U.S. markets fell to their lowest levels in five years last week as increasing evidence of fraudulent or aggressive accounting practices, notably in U.S. companies, battered confidence.

Analysts were skeptical that there would be any near-term end to the rout, sparked by the alleged US$3.85 billion fraud at U.S. long-distance telecoms carrier WorldCom Inc.

The fall on Wall Street also caused pressure in other markets around the world.

Analysts said that with the slide in global stock prices gathering momentum, as concern mounts over the extent of accounting malpractice in corporate America, there were now real worries that the fragile recovery in the global economy was in danger of stalling.

"The U.S. economy is plagued with uncertainty after the scandals," said businessman Sofjan Wanandi.

Indonesia's export products to the U.S. are largely low-end manufacturing products such as textiles and shoes.

"Overall demand from the U.S. could shrink," said Anton Supit, chairman of the Indonesian Footwear Association, adding that a weaker U.S. market would in turn trigger fierce competition among developing countries to win a share of the smaller U.S. market.

He said that in anticipation of these adverse trends, the government must help the local business community be more competitive in the export market.

"For example, the government should provide incentives to help export-oriented small and medium-sized enterprise win the competition," said Anton.

After showing signs of recovery over the previous months, Indonesia's exports were down in May, the Central Bureau of Statistics (BPS) reported earlier in July.

BPS said exports for the month declined slightly by 1.5 percent to $4.7 billion from $4.77 billion in April. This was a hefty 3 percent drop from the $4.85 billion in May last year.

Some economists said the decline in exports could be linked to the sharp appreciation of the rupiah against the US dollar, which caused Indonesian products to be less competitive than those coming from countries whose currencies had not appreciated greatly against the dollar.

But Minister of Industry and Trade Rini MS Soewandi said security and labor problems in the country were the main factors behind the weak export performance.