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Uncertainties in the global economy have further threatened Indonesia’s exports, one of the key contributors to the country’s economy. From April to June this year, the country’s trade balance plunged into the red, with monthly exports declining in contrast to fast-growing imports.
Despite the gloomy export outlook, the government is still optimistic that exports can reach last year’s level of US$203 billion.
The Jakarta Post’s Linda Yulisman recently discussed the outlook of exports, particularly the non-traditional markets, and other trade-related issues, with the Trade Ministry’s director general for national export development, Gusmardi Bustami. Below are the excerpts of the interview.
Question: What is your outlook for our exports amid the current global economic downturn?
Answer: We must be more active in promoting our exports. Most of our export products are basic needs for everyday use: soaps, paper, electronics, clothes and textiles, zippers and so on. People can’t stop consuming these items. Demand may decline because industrial factories in many countries are not fully utilized, resulting in layoffs and a decline in spending power, so that people will spend their money more wisely. But we see that our exports of footwear, for example, are still rising. My instinct is that our exporters can survive.
At least, we can maintain an export figure of US$200 billion this year.
What will the government do then?
We will focus on non-traditional export destinations. There are at least more than 120 countries, 33 countries in Latin America, 53 countries in Africa, 25 countries in the Middle East and 20 countries in Middle Asia. We cannot enter entire markets all at once. We have to find countries to focus on. We also have to choose and then focus on products to be sold there.
So at present, you are carrying out market intelligence on potential markets and products to focus on?
We have already identified them all and figured out a route to guide us through the process. We will enter the markets with the listed products. For the African market, we see opportunities for products like food and beverages, pharmaceuticals, tires, vehicles and glassware and we’ll focus on them. For the South American market, the products are quite the same, namely textiles and textile products, glassware, furniture, shoes and electronics.
Many people are skeptical about the prospects of the non-traditional market, what do you think?
I think we can, because as economies grow, demand also expands. In most of the non-traditional markets, economies have expanded by 5 percent to 6 percent and with such growth rates there will be rising demand for various products.
Maybe exports to these countries cannot compensate for exports to traditional destinations very quickly. We have to compete with other countries and the competition is very tight. But if we do this consistently, I think that export figures will continue to rise and they will replace current key export destinations.
To help boost exports we can use certain strategies, for example selling products using brands created by our buyers instead of our own brands. Why? Because those countries mostly apply high import duties to protect their own industries and labor. If we stick to our own brands, we cannot compete with their locally made products because the price of our products will be much higher.
For example, now we are already processing coffee locally. We export it without our own brand. We do the same thing for lubricants. As our markets already build their own brands, we sell our lubricants in bulk. Doing it this way, we can still export our products while maintaining a competitive edge.
So you are optimistic as there are dozens of non-traditional markets with fast economic growth and with potential surge in demand in these countries, this can compensate exports to key destinations?
Yes, I think we can if we consistently do this.
How long will it take to expand exports to non-traditional markets?
In the past, we have seen our efforts to expand exports to several African countries like Ivory Coast, Ghana and also other countries like Pakistan, succeed as reflected by significant export growth. We estimate exports to other countries will follow a similar trend. Maybe in the next three or five years.
How do you see the competitiveness of our export products in non-traditional markets?
As reflected in the growth of exports to non-traditional markets, we can say our competitiveness is quite good considering the fact that our products also compete with similar products from other countries.
Consumers in Africa, for example, perceive Indonesian goods as better quality than goods from certain countries sold at lower prices.
Competitiveness also deals with costs, which pertain to financing and transportation. We are thinking that we need to produce our products nearer to our customers and for this reason we need a warehouse so that they can reach buyers quickly. Maybe we need to think about how to consolidate
our supply to non-traditional countries so that it can fill markets immediately. We perhaps need trading houses.
Can the government facilitate the establishment of such trading houses?
Ideally, a trading house can provide financing for firms affiliated with it. It also has to give services, such as disseminating information about details of the products that can meet market demand. Such a trading house can sustain as is the case of Mitsubishi of Japan, which also integrates with financing firms and other related firms.
How do you see the role of trade attaches and International Trade Promotion Centers [ITPCs] amid current global economic slowdown?
All attachés or promotion centers should facilitate exports and to do this they should gather sufficient information from exporters. Our directorate general has already set up an information center. We provide detailed information, including buyers’ lists, export directory, market briefs and products. To spread such kind of information as much as possible is what we are trying to intensify.