Exports sluggish, Competitiveness Needs Improvement

News Focus - EXPORTS SLUGGISH, COMPETITIVENESS NEEDS IMPROVEMENT by Vicki Febrianto Jakarta, Dec 20 (ANTARA) - Indonesia earned only US$158.7 billion from exports in the first 10 months of the year down 6.2 percent from the same period last year. The decline in export resulted in a slight deficit with imports surging 9.4 percent to US$159.2 billion in the same period. The trade ministry attributed the decline in the country`s export performance partly to global economic slowdown especially the crisis besetting major economies in the world. "Weak demand in global markets especially in the United States and Europe caused marketing problem for Indonesian commodities," head of the head of the Trade Policy Development of Studies board at the Trade Ministry Bachrul Chairi said here on Tuesday. Decline in exports was attributable to shrinking exports of commodities other than oil and gas. Exports of electrical equipment and machines fell 2.68 percent to US$9.1 billion and rubber exports dropped 28.42 percent to US$8.9 billion . Declines were also recorded in the exports of paper and carton, non knitted garments, as well as knitted goods and organic chemicals. The government policy slapping export tax on cacao beans and crude pall oil (CPO) resulted in a decline in the exports of the two commodities but an increase was recorded in the exports of processed products of cacao and CPO. In the first nine months of the year, processed cacao accounted for 52.9 percent of the country`s exports of cacao with cacao bean exports making up 47.1 percent. In the same period, CPO derivatives dominated the country`s exports of palm oil by 66.4 percent in volume and by 67.1 percent in value. Based on data from the Trade Ministry, Indonesia`s imports had been dominated by capital goods and auxiliary basic materials which contributed to the revival of the real sector notably the manufacturing and aviation sectors. "The increase in imports were attributable to higher imports of auxiliary basic materials and capital goods like aircraft, gas and steel," Bachrul said. Bachrul said the increase in the import of capital goods indicated the revival of the real sector especially in aviation service and industry. Imports of aircraft and components surged 41.4 percent to US$1 billion in value in the first 10 months of the year. The data at the Trade Ministry show that auxiliary basic materials accounted for 72.9 percent worth US$116.3 billion of imports in the January-October period with capital goods accounting for 20 percent worth US$31.9 billion. The value of imports of auxiliary basic material rose 7.4 percent and the import value of capital goods rose 21.4 percent from the previous year. Imports of consumer goods fell 1.3 percent to US$11 billion after a surge recorded last year. Imports of steel products grew 38.2 percent to US$1 billion , imports of motor vehicles and components rose 30.24 percent to US$1.9 billion and imports of optical equipment increased 26.2 percent to US$0.3 billion . Strong growth was also recorded in the imports of inorganic chemicals , up 25.9 percent to US$300 million , and imports of steel rising by 22.8 percent to US$1.6 billion . In October, the rise in imports was attributable partly to growing demand for crude oil which rose 23.9 percent and imports of non oil/gas commodities increasing by 12.4 percent from the previous month. "A 109.5 percent surge in the imports of gas to US$2.4 billion and 11.1 percent rise in the imports of commodities other than oil and gas to US$124.4 billion contributed the increase in the country`s imports in the first 10 months of the year," Bachrul said. Meanwhile, the Indonesian Chamber of Commerce and Industry (Kadin) said low competitiveness was one of the causes of the fall in exports. "We have to be wary of the declining trend in exports that could result in a deficit in 2013 because of weak competitiveness," Kadin chairman Suryo Bambang Sulisto, said here on Tuesday. Suryo said the country needs to continue to improve the competitiveness of its commodities, otherwise , imports would continue to be on the rise with the larges domestic consumption. "If domestic production could not keep pace with the growing domestic consumption imports would continue to rise," he said. Unfinished home work Kadin said inadequate quality of infrastructure is one of the causes keeping low the the competitiveness of the country`s products. Improving the quality of infrastructure is one of the country`s home works yet unfinished until today. Based on the report of World Economic Forum, 2012-2013, Indonesia is the 78th among 100 countries in infrastructure quality worse than the 76th in the previous year. The report placed Singapore the second best, Malaysia the 32nd, Thailand the 46th and Brunei the 57th. Improvement of infrastructure and the bureaucracy is vital if the country is improve its competitiveness, Kadin said. "Poor infrastructure and inefficient bureaucracy have to be improved otherwise the country will remain uncompetitive and lose its attraction among investors," Suryo said. He said financial difficulty has always been a drag in the implementation of infrastructure projects. He said the government should allocate subsidy which has been provided on oil fuels to finance infrastructure projects . "Kadin has proposed to stop providing oil fuel subsidy to be used instead for infrastructure development," he said. In 2013 , subsidy on energy would reach Rp274 trillion, he said, adding in practice the subsidy could rise to Rp300 trillion. Subsidy on oil fuel alone is set at Rp193.8 trillion in 2013. He said rich people enjoy the subsidy on oil fuel more than poor people do, adding the subsidy will be more useful if allocated for infrastructure development.