Value of non-oil and gas exports expected to drop 15%

JAKARTA (JP): The Association of Indonesian Exporters (GPEI) has estimated a 15 percent drop in the value of the country's non-oil and gas exports this year due a deterioration in the country's key economic indicators.

"In terms of volume, the drop in country's non-oil and gas exports could reach 50 percent in 1999," the association said in an assessment report.

GPEI attributed the estimated sharp drop in non-oil exports to a worsening of the country's economic indicators, which were exacerbated by a delay in the disbursement of international loans to the country.

The association said the delay in the disbursement of the International Monetary Fund (IMF) bailout package and the World Bank's loan not only hurt the liquidity of the country's payment system, but also the country's risk and sovereign ratings.

The IMF and World Bank suspended loans to Indonesia last month because the government refused to release a full report of the audit result on the high-profile Bank Bali scandal, which allegedly involved close aides of President B.J. Habibie.

The association said the country's poor ratings reflected continued uncertainty in the economy, and the government's inability to restore the ailing business climate.

The lack of confidence had also harmed business transactions with overseas partners, the association said. "The reluctance of foreign banks to accept letters of credit from Indonesian banks hurts exporters, because they face difficulties in financing imports of their raw materials," he said.

According to the GPEI data, the value of Indonesia's exports and imports during January and August of this year fell by respectively 8.18 percent and 13.23 percent.

"In terms of volume, Indonesia's exports during the period dropped by 47.2 percent," the association said, adding that the exports were lower in terms of value due to an increase in the price of most non-oil and gas commodities.

In the period from January to August this year, Indonesia's import of non-oil commodities declined by 16.13 percent, a figure which however was still well above the 34.62 percent decline recorded in the same period last year.

In the same period last year the value of non-oil and gas exports dropped by 10.91 percent, resulting in a decline in its contribution to the country's total exports of 81.53 percent, from 83.88 percent in the corresponding period in 1998.

Indonesia's exports of non-oil commodities reached US$40.97 billion in 1998, a figure lower than 1997's record of $41.82 billion, but higher than 1996's record of $38.09 billion, he said.

Japan remained the largest market for Indonesian exports during from 1981 to 1998. The value of Indonesia's total exports to Japan during the period amounted to $184.45 billion.

"The second largest market for Indonesian export during the period was the United States, followed by Singapore, the Netherlands and Hong Kong," said GPEI chairman Benny Soetrisno.

Data from the association showed Indonesia exported goods worth a total of $83.64 billion in value to the United States from 1981 to 1998, $53.71 billion to Singapore, $15.43 billion to the Netherlands and $14.21 billion to Hong Kong.

The sixth largest market for Indonesian goods during the period was Germany with total export values amounting to $13.70 billion, followed by Australia with $11.33 billion, Britain with $10.71 billion, Malaysia with $8.31 billion and Italy with $7.25 billion.

Benny said the poor ratings given to Indonesia, such as country risk and insurance ratings of E-46 and E-20 respectively for the political and economic sectors clearly indicated Indonesia's poor performance in the eyes of the international trade and investment community.

He said to solve the problems Indonesia should gradually stop its dependency on foreign loans by increasing its export capacity and promoting its tourist sector in order to gain foreign exchange. (cst)