ASEAN KEY DESTINATIONS
Indo rubber trade may slip
Suharto Honggokusumo, the executive director of the Indonesian Rubber Association, said last week that prices for rubber could slip as demand for the commodity tumbles amid weak economic growth in the United States.
Executives and analysts alike are raising the same concern — that declining productivity in Indonesia’s third-biggest trading partner could have an impact on industries that rely on the United States as a major buyer for textiles, rubber and crude oil.
Growth in the world’s largest economy slowed to 1.6 percent year on year in the second quarter from 2.2 percent in the first.
The US accounted for about 37 percent of Indonesia’s US$11.2 billion textile exports last year, and Ade Sudrajat, chairman of the Indonesian Textile Association said that while demand would probably weaken, he was hopeful there would still be an increase in shipments of shirts, pants and jackets.
“My worst-case scenario is that textile exports will be the same as last year,” he said. “Still, I’m positive about our prospects. After all, the economy is still growing there [in the US] despite a slowdown, and jobs are being created. That means demand for our garment is still there, despite not growing as fast.”
Amber Tjahyono, chairman of the Association of Indonesian Furniture and Handicraft Industry (Asmindo) said that weak demand has already cut sales for the industry by 20 percent.
Export of wooden furniture products, rattan bamboo, metal, plastic and handicraft by value dropped to $1.2 billion in the first half of the year from $1.5 billion in the same period last year.
“US and European markets continued to weaken, while the strengthening of the rupiah against the dollar makes exporters scream,” Amber said.
Loyal customers in the United States typically accounted for 30 percent of Indonesia’s total furniture export, “but nowadays it has fallen by as much as 10 percent,” he said.
Economic growth still looks dismal in other nations with which Indonesia trades. In Europe during the second quarter, France’s economic growth stalled, and Greece — the center of the continent’s debt crisis — had a 6.9 percent contraction. Asia did not fare as badly, but economic activity has been slipping. Even Indonesia’s economy, which expanded by 6.1 percent last year, isn’t immune.
Central bank governor Darmin Nasution last week revised down Indonesia’s growth. “We previously predicted it would be at 6.6 percent to 6.8 percent. With the latest development it would likely be around the lower range,” he said.
Analysts say Indonesian companies have been diversifying their exports to avoid dependence on a single country for their earnings. Those same companies could also look to expand their sales at home, buoyed by Indonesia’s economic growth.
“Indonesia’s largest markets for commodities are China and India,” said Mastono Ali, an analyst at CIMB Securities Indonesia.
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