INDONESIA'S EXPORTS TO EXPERIENCE NEGATIVE GROWTH

By Andi Abdussalam

Jakarta, March 21 (ANTARA) - Based on predictions made by various institutions, Indonesia's exports will experience negative growth this year due to the global economic crisis that has cut people's purchasing power and drives down export volumes.

        "Indonesia's exports in 2009 are expected to experience a negative growth of 4.6 percent due to the world economic downturn and decline in commodity prices," Bank Indonesia (BI) Deputy Governor Hartadi A Sarwono said.

        Under present circumstances, the prices of most of the export products which are primary commodities have been declining since mid-2008.

        Since July 2008, export of plantation products have actually shown signs of crisis as marked by a decline in the prices of agricultural and plantation products like crude palm oil.

        Virtually, prices of all commodities are declining. "Exports would experience negative growth because there would be two factors which would continue to fall, namely the volume and the prices all commodities, including oil and gas as well as goods and services," Bambang Prijambodo, macro development planning of the National Development Planning Agency (Bappenas), said.

        The Bappenas itself has set higher negative growth in the country's exports. It projected national exports in 2009 would grow by minus six percent.

        Bambang Prijambodo said in the non-oil and gas sector the potential decline in export receipts would reach about 20 percent, or about US$21.6 billion, as compared with that of the previous year which stood at US$108 billion.

        Actually, exports last year still enjoyed an increase. The country recorded a total export of US$136.76 billion in 2008, almost 20 percent higher than the US$114.1 billion in the previous year, according to a media report.

        A high negative growth will force the country to revise its economic growth target. Finance minister Sri Mulyani said her office had noted that exports would decline this year.

        So, she said, if the export contraction reached five to 10 percent until the end of the year, target of economic growth would be revised.

        "Our scenario is if export contraction until the end of the year reaches minus five or 10 percent, revision on growth will happen," she said.

        In the meantime, the Econit Advisory Group predicts that national export growth this year would stand at minus five percent, suggesting that a new breakthrough should be sought amid the ongoing global crisis.

        "This year, it is not necessary to expect more from export activity, because growth in this sector will only stand at minus five percent," director of the Econit Hendri Saparini said during the launch of a book on 'Economic Constitution' on Wednesday.

        Therefore, the country had to optimize export of each group of specific products and not to export of raw materials.

        "Considering that our export is much depending on the exploitation of natural resources, we have to stress on the export of high value-added products," he said.

        Sadly, efforts to improve value added products through boosting industry are also hampered by the economic crisis.

        Due to the economic crisis, according to secretary general of the Ministry of Industry Agus Tjahajana, Indonesia's industrial sector is expected to grow only between 2.5 and 3 percent.

        "We have projected industrial growth at 2.5 to 3.5 percent only, down from about 5 - 7.5 percent in previous years. This is due to the impact of the global financial crisis," Tjahajana.

        He said the sub-sector to be affected most was the export-based one. He said about 70 percent of textiles was usually exported while the remaining 30 percent was for domestic demand.

        About 50-60 percent of shoes was exported and the rest sold in the domestic market. However, not all of export-based products would collapse because of the big potentials of market at home that could serve as an alternative market.

        In order to boost domestic market, the Indonesian government will soon make it obligatory for civil servants, military and police personnel to use domestic products in an effort to improve the performance of national industries.

        The industry ministry has already established 21 groups of goods and services that have been able to be produced at home for domestic market covering around 470 kinds of goods and services.

        The 21 groups of goods and services that are already produced at home include materials for supporting agricultural products, agricultural machineries, mining supporting equipment, oil and gas supporting equipment, electricity, electronic and telecommunication devices, construction and building materials, factory equipment machineries and construction heavy equipment.

        The director general of small and medium-sized industries, Fauzi Aziz, said Administrative Reform Minister Taufik Effendi would soon issue a circular for distribution to all government offices on the requirement to use domestic products.

        "Two days ago Industry Minister Fahmi Idris came to the office of the state minister for administrative reform to discuss preparations for the implementation of the circular," he said.

        The need to empower domestic market in the face declining exports is also voiced by Trade Minister Mari Elka Pangestu. To anticipate export decline, she said Indonesia was now seeking new markets and new products for marketing at home.

        "With regard to exports the prospect will be gloomy like now. So we must safeguard the domestic market," she said.***2*** (T.A014/A/HAJM/11:55/A/O001)