ASEAN KEY DESTINATIONS
Government flexes muscles to reduce trade gap
Indonesia: Slim US trade in January has caused fresh concerns about the likelihood of a significant pickup, which will be necessary to sustain Indonesia’s growth despite the government’s optimism.
The country’s trade balance slipped back into the red in January driven by a US$430.6 million deficit after seeing consecutive surpluses of $42.4 million in October, $776.8 million in November and $1.5 billion in December last year.
In January, exports dipped by 14.63 percent to $14.48 billion, while imports declined slightly by 3.5 percent to $14.92 billion.
The trade gap is not particularly worrying, trade officials have said, below the figure of $800 million they had earlier anticipated as a result of the ban on raw mineral ore exports, which took effect in mid-January.
Mineral ores were traditionally a key contributor to Indonesia’s exports, more than 60 percent of which were made up of commodities.
Exports of overall mining commodities plunged by 19.9 percent to $2.06 billion in January year-on-year.
Overall mining exports amounted to $31.32 billion throughout last year, or 17.16 percent of $182.57 billion in total exports.
Trade Minister Muhammad Lutfi said that the government was ready to deploy a number of measures, particularly to push up manufactured goods exports and curb fuel imports, in a bid to soften the potentially widening deficit.
The trade deficit is a major threat to the country’s current account, which last year stood at $28.5 billion (3.26 percent of the total gross domestic product [GDP]), up from $24.4 billion (2.78 percent of the GDP) in 2012.
Optimism has been high as in the final three months of last year, non-oil and gas exports rose by 3.8 percent to $39.9 billion on the back of stronger demand from the US and Japan, the weaker rupiah and stable commodity prices, in addition to a large volume of overseas shipments prior to the implementation of the ban on exports of
That resulted in a $7 billion surplus in non-oil and gas trade during the fourth quarter last year.
Despite the fact that the January export data has yet to reflect a continuous upward trend, officials have cited the overall expansion in international trade as the basis for the positive outlook on Indonesia’s exports in the coming months.
In its trade growth projections for this year, the World Trade Organization (WTO) said that global trade would be “much improved”, hovering between 4 to 4.5 percent, nearly double than the 2.5 percent experienced last year.
The underlying trend of non-oil and gas exports to some major countries, or the so-called “traditional destinations”, is stronger.
Exports to China were up 22.56 percent in January compared to last year, while exports to the US rose 1.45 percent and exports to Australia jumped considerably by 147.54 percent.
However, exports to Japan dropped 14.35 percent year-on-year in January.
The recovery in global trade will also drive both volume and prices of commodities, such as palm oil and coal, which are major contributors to Indonesia’s exports.
On another front, the country will lean on domestic use of palm oil-based biofuel as a way to considerably cut fuel imports, which will allow the country to save around $3.1 billion from oil imports according to Deputy Trade Minister Bayu Krisnamurthi.
To rein in ballooning oil imports, the government required the increased use of biodiesel in fuel blends from 2.5 percent to 10 percent late last year.
Oil and gas imports totaled $45.27 billion in the past year, up only by 6.35 percent from 2012, thanks partly to the government’s move to raise fuel prices in June
State-owned oil and gas firm Pertamina and state-owned electricity firm PLN are now in talks with local biofuel producers regarding the purchase of the plant-based oil.
The Industry Ministry’s director general for international industry cooperation, Agus Tjahajana, said the government would step up efforts to substitute imports with locally produced goods to curb overseas purchases.
It would also aim to attract new investments to make raw materials, intermediary goods as well as capital goods locally.
The ministry is mapping out the sectors with heavy dependence on import components.
Imports of raw materials and intermediary goods valued at $141.96 billion and imports of capital goods reached $31.53 billion, representing 76.06 percent and 16.9 percent of overall imports of $186.63 billion, respectively.
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