Global credit crisis to decrease exports to U.S., Europe, business leader says

Wed, 10/15/2008 10:38 AM  |  Bali

The global credit crisis that has toppled major U.S. companies and European banking giants will trigger a decline in exports from Bali, a local business leader says.

Panudiana Kuhn, chief of the Balinese chapter of the Indonesia Textile Association (API), said if the market continued to behave negatively toward investing, Bali would see a decline in export numbers as early as next year.

The United States and European nations are major importers of Indonesian textiles, handicrafts and fishery products.

According to the Balinese Trade and Industry Agency, Indonesian exports of textile products to the United States make up, on average, more than 30 percent of the region's total export products.

He warned that the global credit crunch threatened to reduce that number because of the overseas market's weakening purchasing ability.

"According to reports I have received, there is already a significant reduction in the number of orders," he said.

"If we're already looking at a lower number of orders by the end of this year then we won't be delivering anything next year, especially on textile products, which always require a lot of time to make."

Panudiana said the number of shipped goods heading overseas for the remainder of 2008 would remain unchanged, as it includes items ordered prior to the financial turmoil.

"Shipments until December will continue, including items that have been ordered for Christmas," he said.

To alleviate the effect of the financial crisis, Pandiana said the government should work on improving the real sector by reducing borrowing rates and taxes.

"Hopefully, that way, the conditions will improve," he said.

Chairman of the Balinese chapter of the Indonesian Chamber of Commerce and Industry, Gede Wiratha, downplayed Panudiana's concerns, urging business players not to worry.

He said the expected reduction in exports was simply a risk that "a developing country like Indonesia has to deal with if it wants to follow in the footsteps of other advanced countries by adopting a free market philosophy".

He said Indonesia would not be too affected by the global credit crisis because of strong growth in the country's economy. Relatively new players in the market, he said, such as Internet producers, were to blame for the problem.

"These players are still new to the market. They claim that they come from an intellectual group but in fact they have never actually run a real business," Gede said.

"The economic network that's being developed is similar to a giant casino, which encourages people to play games in the stock market and not actually produce anything. That's how bad players lose business."

The concern over global financial markets began infiltrating Indonesia's business climate after the stock market's main index fell by around 21 percent in just a few days late last week, prompting the Indonesian Stock Exchange to suspend trading.

Gede, who owns Bounty Cruise tourist company, disagreed with the government's decision to stop trading.

"It's just ridiculous. It shows that the government and stock traders are only out there to gain profits," he said.

He further lambasted the government's decision to have state-owned enterprises buy back shares to cover losses, calling the decision an "insensitive" use of taxpayers' money.

"Why can't they spend that money for something more real and useful for the public," he said, adding he would deliver his criticism to the President in the upcoming Asian Beach Games.

Trading at the stock exchange resumed Monday, with the market seemingly bouncing back after the government introduced regulations to curb "unhealthy" trading methods, while providing insurance to bankers and bank customers. -- JP/Wasti Atmodjo

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