Jakarta, July 1 (ANTARA) - As the economies of Indonesia's export destination countries are improving, industries at home and the real sector are waiting for bank lending rate cuts in order to increase the competitive edge of their products and to respond to the favorable market abroad.
However, the present bank landing rates are still high so that the competitive edge of Indonesia's exports could not yet be increased. It is feared that Indonesia would not be able to benefit from the increasingly favorable world market in line with the world economic recovery.
"We have reminded several times that the global economy has begun to enter the recovery phase as indicated by the recovery of the United States and European Union inter-bank markets," Chairman of the Indonesian Chamber of Commerce and Industry (Kadin)'s Permanent Committee for Internal Trade Affairs, Bambang Soesatyo said on Wednesday.
Based on the developments, Kadin has reminded several times the monetary authorities of the importance of lowering banks' lending rates so that industries could orient their products to export markets while the real sector could also act soon to respond to the indications of economic recoveries in Indonesia's export destination nations.
"If our business is not able to respond to the global economic recovery, we will get nothing because our export commodities would not be able to compete," Soesatyo said.
"Thanks to its successful economic stimuli, a number of Indonesia's export destination countries have begun to normalize their demand for commodities. We have to respond to it rightly so that we would be able to boost our exports," he said.
Unfortunately, although Bank Indonesia (BI) has lowered its benchmark rate (BI Rate), banks have not yet lowered their lending rates significantly.
"The lending rates offered by banks at present are not yet able to increase the competitive edge of our export products," he said.
He said that because lending rates are still high only large scale exporters or those who had contracts are able to utilize the export opportunities now open.
In line with the weakening of inflationary pressures, the central bank has continued to cut its key rate every month since December 2008 until June 2009.
The BI benchmark interest rate at present is set at 7 percent. The reference rate has been undergoing a cut of 2.5 percent (250 basis points) since December 2008.
However, the aggressive cuts in the BI rate was not responsively followed by banks. The lowering of banks lending rates is still very slow.
According to another BI deputy governor, Hartadi A Sarwono, this conditions happened because banks still feared possible risks in connection with the global economic condition of late.
Besides, banks cannot be that easy to cut their lending rates. It should be done in stages although BI has cut its key rate several times.
After all, according to economic observer Fauzi Ikhsan, banks also still waited for the lowering of the yield rate of state bonds or state debenture (SUN) which still promises high yield.
"Banks at present prefer to keep their funds in the government bonds rather than providing them in the form credits to bank customers. Banks viewed SUN is more secure with higher yields. So it would be difficult for banks to lower their rates except the SUN's yield rate is lowered," Fauzi said.
On the other hand, the SUN instrument, as well as the government's sharia-based bonds, are also competing with banks to win the third party funds.
Virtually, banks already cut their lending rate several times from 16 percent to the current level of 13 percent. But a rate of that level is still considered high by businesses.
Businesses want the banks interest rate to be cut to about 10 percent, so that the economic growth and exports could be boosted. Although the interest rate of banks credit have been cut to about 13 percent, yet it was not able to boost exports.
After all, exports in the first quarter of this year are far lower compared with that in the corresponding period a year earlier. According to th Central Board of Statistics (BPS) on Wednesday the country's non oil and gas exports in the January - May period dropped by 21.9 percent if compared with the same period a year earlier.
The overall exports in May 2009 however increased if compared with that in the previous month. Indonesia's exports in May 2009, according to the BPS, increased 9.5 percent to 9.26 billion dollars compared with those in the previous month.
"But compared with the corresponding period a year earlier, the May exports are 28.28 percent lower," Ali Rosidi of BPS, said on Wednesday.
Trade Minister Mari Elka Pangestu said last month that Indonesia's non-oil/non-gas exports in 2009 were predicted to drop by 20 percent from last year's value of US$107.8 billion or higher than earlier forecast at 30 percent.
"Our initial forecast is minus 30 percent but now it may be 20 to 30 percent," she said. She said non-oil/non-gas exports had declined since October 2008 and were likely to reach bottom in March. "We hope the trend will rise and therefore contracts will not be as big as in previous years," she said.
According to the BPS, the country's non-oil/non-gas exports from January to April 2009 reached US$26.90 billion or dropped by 22.68 percent compared to last year's.***2*** (T.A014/A/HAJM/20:30/a014)
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