LOCAL BUSINESSES NEED SUPPORT TO MAINTAIN TRADE SURPLUS

By Andi Abdussalam

Jakarta, Oct 3 (ANTARA) - Indonesia succeeded in recording a trade surplus last August after experiencing four consecutive months of deficits, but the trade deficit can resurface if the government does not support local businesses to increase exports.          The Indonesian Young Entrepreneurs Association (Hipmi) has predicted that the country's current account deficit will resurface in the near future unless the government supports local entrepreneurs in developing their businesses.          "The global economic conditions will force other countries to divert their export destinations to Indonesia. Imports will flood the country and would not be balanced with exports if local businesses are not supported and developed," noted Raja Sapta Oktohari, general chairman of Hipmi, on Monday.          He said that European countries and the United States, the major export destinations of many countries, no longer had strong purchasing powers. In the meantime, China, which is one of the world's largest markets, is experiencing slow economic growth.          According to the Central Board of Statistics (BPS), the August trade balance recorded a surplus of US$248.5 million, improving from the previous month's deficit of US$263.8 million.          The cumulative trade surplus for the January-August 2012 period was recorded at US$496.7 million. However, it is still much lower than corresponding figures of US$19.8 billion recorded last year.          According to the BPS, the total trade surplus declined because non-oil trade surplus shrank to US$2.1 billion. Meanwhile, the oil and gas trade deficit amounted to US$1.6 billion, in contrast to last year's surplus of US$627.8 million.          Thus, in August Indonesia posted a trade surplus after seeing four consecutive months of deficits.          Data at the BPS shows that Indonesia's export figures in August reached US$14.12 billion, while its total imports were recorded at US$13.87 billion.          "A decline in commodity prices put the biggest pressure on exports despite an increase in the country's export volumes," said Deputy Trade Minister Bayu Krisnamurthi.          "Rising volumes suggest that the competitive edge of many of our export commodities is intact. However, global demand will now have a greater influence on the performance of Indonesia's exports," he pointed out.          However, he expressed optimism that Indonesia will continue to maintain its trade surplus, which reached US$248.5 million in August, until the end of this year.          "At present, we are concentrating on how to maintain the trade surplus by managing the gap between imports and exports and making efforts to increase exports," he said here on Tuesday.          The trade ministry has adopted a number of steps to maintain the trade surplus in an effort to achieve the government's export target of US$203 billion for 2012.          "From the export aspect, we are encouraging efforts to explore new export destinations and to increase the added value of exports. From the import aspect, we are trying to protect local consumers by restricting the entry of foreign goods which can be produced at home," Krisnamurthi explained.          Chief Economic Minister Hatta Rajasa said that Indonesia's trade surplus of US$248.5 million would help the government achieve its economic growth target of 6.5 percent, set in the state budget.          "With two strong economic generators, namely investment and trade surplus, I am convinced growth could be generated so that the target that has been set for this year would be achieved," Rajasa said after attending a hearing with the House Budgetary Agency at the House of Representatives (DPR) building on Monday.          He added that the government's efforts to curb the flow of imports had shown significant results so that the current surplus should continue to be maintained. The government will also continue to encourage exports.          "Imports are declining sharply, with figures slightly more than 15 percent and it is the result of our efforts to curb them. We also keep watch on the investment flow so that it would not use too many import components.  Usually, the decline in exports is followed by an increase in imports, but this time imports have adversely dropped. We should maintain this momentum," Rajasa, who is the coordinating minister for economic affairs, said.          He went onto say that the high imports in the previous months could have been boosted by the entry of capital goods into the country. But in the last quarter, capital goods' imports declined overall and some of them even stopped being imported.          "I have not yet checked figures. Possibly, we have imported all the needed capital goods and now we are entering the production stage," Rajasa asserted.          However, according to Hipmi chairman Oktohari, the high economic growth, which is higher than the average growth in Asia, will turn the country into an export destination by many countries.          According to Oktohari, this is one of the causes why Indonesia experienced a trade deficit in the four consecutive months until last June.          "The trade surplus we registered in August will not last long if the government ignores local entrepreneurs and does not provide assistance to them for developing their businesses in line with international standards," said Oktohari.          He added that improved exports by local businessmen would be able to balance imports, which actually tended to increase, so that the government would be able to preserve its trade surplus.          "However, it seems that a number of regulations do not support the development of local businesses. New local entrepreneurs often face difficulties in running their businesses," Oktohari lamented.          Citing an example, Oktohari said that in order to get financial or credit access to banks, an entrepreneur was required to submit a financial report, which had been audited in the last two years, to banks.          "This regulation will discourage the emergence of new business players. The small number of emerging new entrepreneurs will reduce the value of Indonesia's exports in the future," noted  Oktohari.          Satwiko Darmesto, a director of the BPS, acknowledged that it was difficult to estimate if Indonesia's trade balance surplus could be maintained or not in the coming several months.          He said that it was not certain whether the August surplus was generated by a good export performance.          "The value of Indonesia's exports is still stagnant. What is really happening is that Indonesia's imports are declining, particularly imports of raw and auxiliary materials," said Darmesto. ***2***   (T.A014/A/KR-BSR/B003) 03-10-2012 18:22:11