US Recession Threatens Domestic Industries
Monday, 21 January, 2008 | 17:19 WIB
TEMPO Interactive, Jakarta: M. Lutfhi, Head of the Investment Coordination Agency (BKPM), has said he is concerned that the economic recession in the United States will threaten the continuity of domestic industries, especially machine-based manufacturing industries.
“The connection is in fact not direct,” said Luthfi in Jakarta last weekend.
The US recession, he said, will spread to East Asia, with a decrease in the import of Chinese products and then China can pressure Indonesia.
Lutfhi explained that in the beginning, the sub-prime mortgage and high world oil prices made the US economy sluggish.
Consumption rate in the USA dropped drastically, followed by a weakening in the demand for industrial goods.
As a result, the import of goods from the Asian region will also drop.
Most influenced by the US recession, he went on to say, was China because the country is the largest exporting country to the USA.
“That's the problem,” said Luthfi.
If China's market to the USA collapses, China will probably look for new markets and therefore China's goods will flood countries outside the USA.
Indonesia will be the most ideal location for a flood of China's products as the large population is a potential market.
“This will be a problem to national industrial growth,” said Luthfi.
The government, he said, must prepare many ways to anticipate this negative effect.
For example by continue fixing investment climate or giving incentives for national industry.
“If that’s not sufficient, then perhaps protection will be required,” he said.
Contacted separately, the Coordinating Minister for the Economy, Boediono, said the recession flow which is now threatening the US economy need not be worried about excessively.
He said he was certain that the recession in the USA would not shock the national economy.
Exports to the USA, he said, would probably slighted affected.
But the government is not concerned that exports to the USA will decline much because several commodities will still provide a large contribution to export revenues as prices in the international marketplace are still good.
ANNE L HANDAYANI | AGUS SUPRIYANTO
TEMPO Interactive, Jakarta: M. Lutfhi, Head of the Investment Coordination Agency (BKPM), has said he is concerned that the economic recession in the United States will threaten the continuity of domestic industries, especially machine-based manufacturing industries.
“The connection is in fact not direct,” said Luthfi in Jakarta last weekend.
The US recession, he said, will spread to East Asia, with a decrease in the import of Chinese products and then China can pressure Indonesia.
Lutfhi explained that in the beginning, the sub-prime mortgage and high world oil prices made the US economy sluggish.
Consumption rate in the USA dropped drastically, followed by a weakening in the demand for industrial goods.
As a result, the import of goods from the Asian region will also drop.
Most influenced by the US recession, he went on to say, was China because the country is the largest exporting country to the USA.
“That's the problem,” said Luthfi.
If China's market to the USA collapses, China will probably look for new markets and therefore China's goods will flood countries outside the USA.
Indonesia will be the most ideal location for a flood of China's products as the large population is a potential market.
“This will be a problem to national industrial growth,” said Luthfi.
The government, he said, must prepare many ways to anticipate this negative effect.
For example by continue fixing investment climate or giving incentives for national industry.
“If that’s not sufficient, then perhaps protection will be required,” he said.
Contacted separately, the Coordinating Minister for the Economy, Boediono, said the recession flow which is now threatening the US economy need not be worried about excessively.
He said he was certain that the recession in the USA would not shock the national economy.
Exports to the USA, he said, would probably slighted affected.
But the government is not concerned that exports to the USA will decline much because several commodities will still provide a large contribution to export revenues as prices in the international marketplace are still good.
ANNE L HANDAYANI | AGUS SUPRIYANTO