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Manufacturing industry remains intact despite weak data
A decline in the import of raw materials and capital goods from January until June does not reflect a slowdown in the output of the manufacturing industry, business players have said
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span>A decline in the import of raw materials and capital goods from January until June does not reflect a slowdown in the output of the manufacturing industry, business players have said.
Imports slid 7.63 percent year-on-year (yoy) to US$82.2 billion from January to June, with all types of imports, from raw materials to capital and consumer goods, in the red, according to Statistics Indonesia (BPS) data released on Monday.
Raw and auxiliary material imports declined 7.7 percent yoy to $61.7 billion, data from BPS shows. Imports of capital goods and consumer goods also contracted 6.15 percent to $13.16 billion and 9.31 percent to $7.4 billion.
Responding to the figures, Indonesian Chamber of Commerce and Industry (Kadin) chairman Rosan P. Roeslani said production slowdowns had indeed occurred mostly in raw commodities such as coal. However, there had been no such downturn in manufacturing.
“The imports of raw materials and capital goods still comprised nearly 90 percent [of the total imports],” Rosan told reporters on the sidelines of a seminar on Tuesday, referring to BPS data that showed the same figure.
Johnny Darmawan, chairman of manufacturing industry at the Indonesian Employers Association (Apindo), also refuted rumors about the manufacturing slowdown, saying that lower imports in the second quarter was the result of businesses stocking huge portions of raw materials and capital goods in January and February.
“There were indeed lower imports in March and April as people were anticipating political tensions [related to the presidential election] but the tension has relaxed since then,” Johnny told The Jakarta Post over the phone on Tuesday. “Optimism for political reconciliation is reflected in our stock market. So, imports should fully recover by August.”
He acknowledged that negative impacts of the trade war might persist in the near future but said President Joko “Jokowi” Widodo’s firm intention to reap the benefits from the feud would be able to motivate businesses to maintain performance.
Therefore, this year’s manufacturing growth should exceed that of the economic growth forecast at 5.3 percent, as opposed to 2018 when the sector grew below 5 percent, he added.
“With such strong will from our President, our manufacturing industry will be able to grow better than last year when it was still overwhelmed by the second-round effects of the trade war and still lacked import substitutions,” said Johnny.
Separately, Indonesian Footwear Association (Aprisindo) executive director Firman Bakri said members of the association had neither reported declines in production nor export volume in the first half of 2019.
“However, the decline in production value has been going at an alarming rate. On average, the decline between January to June was at 12 percent compared to the same period last year,” Firman told the Post, adding that the sector had seen small hope for growth this year.
The decline in value, he said, was caused by the potential adjustment in the country’s local and foreign footwear market due to slowing economic growth and reduced demand on the back of the trade war, which had forced manufacturers to adjust prices to maintain competitiveness.
He further said that the country’s footwear industry still imported roughly 60 percent of its materials, which mostly came from China and Vietnam, but claimed that there had been no visible decrease in material imports.
“Our imports are still at the same [level], even if it turns out that there was a production decrease,” Firman added.
