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Jakarta Post

Good signs from exports

  • Editorial Board

    The Jakarta Post

Jakarta   /   Wed, June 27, 2018   /   08:04 am
Good signs from exports Exports to China and the US, Indonesia’s main trading partners, which remained high. (Shutterstock/File)

Indonesia’s trade deficit has continued unabated as imports continue to increase. As reported by the Central Statistics Agency (BPS) on Tuesday, however, the trade deficit in May declined compared to the previous month, indicating that the country’s export performance is on the right track despite the escalating trade tension between the United States and China.

Indonesia’s trade deficit fell slightly to US$1.52 billion in May from $1.62 billion in April, but earnings from exports, which rose by 10.9 percent to $16.12 billion monthon-month (mm), were unable to cover the spending on imports which climbed by 9.17 percent to $17.64 billion from the figure in April.

On the deficit aside, the country’s trade performance in May was quite encouraging, as evident in the exports to China and the US, Indonesia’s main trading partners, which remained high. This only shows that the so-called trade war between the world’s two largest economies has barely affected Indonesia’s exports to these countries.

BPS data shows Indonesia’s non-oil and gas exports to China rose 15.4 percent mm to $2.09 billion in May, while non-oil and gas exports to the US were up 10 percent to $1.57 billion in the same period. Notwithstanding the insignificant impact of the US-China trade feud, Indonesia needs to find innovative ways to protect its exports in anticipation of a full-blown trade war.

International Monetary Fund (IMF) managing director Christine Lagarde has warned that the escalating row between the US and China poses an increasing threat to the global economy. As reported, apart from China, the US has imposed steel and aluminum tariffs on Canada, Mexico and the European Union in the name of national security. All three trading partners have announced retaliatory measures.

US President Donald Trump is expected to unveil another steep import tariff later this week on a new list of Chinese goods worth around $50 billion in response to alleged Chinese theft of American intellectual property. The policy will go into effect shortly afterward.

As the battle of the titans looms, Indonesia has to be prepared for the worst.

Also encouraging in Indonesia’s trade balance in May was the fact that the imports mostly comprised capital goods such as machinery and other industrial equipment, which only indicates recovery of the country’s manufacturing sector.

The competition in the global market will certainly get fiercer, and the enmity between global powers will certainly exacerbate it. Thanks to the modernization of technology in the manufacturing sector, improvements to infrastructure facilities such as ports and toll roads and a series of deregulatory measures introduced by the government lately, Indonesia should remain confident about winning the market competition.

Apart from consumer spending and investment, exports serve as an engine of Indonesia’s economic growth. It is therefore imperative for the government to provide a more conducive and healthier environment for the country’s export-oriented industries to grow.