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Jakarta Post

Govt ships $1.64 billion exports to capitalize on momentum of Q3 surplus

Govt ships $1.64 billion exports to capitalize on momentum of Q3 surplus Cranes loom in the background over an aerial view of containers at Tanjung Priok port in Jakarta, as seen in this stock photo taken on July 10, 2017. (Shutterstock/Creativa Images)
Dzulfiqar Fathur Rahman (The Jakarta Post)
Jakarta   ●   Mon, December 7, 2020 2020-12-07 15:59 161 d66dcbf21949a93b498053ceec464ed6 1 Business exports,Trade,market,import,Jokowi,current-account-deficit,foreign-exchange-reserves Free

The government on Friday released a shipment of exports worth US$1.64 billion by 133 large and small businesses to seek alternative markets and to revive Indonesian trade, which has slowed during the COVID-19 crisis.

While 79 large businesses accounted for the overwhelming majority of the exports, 54 small and medium enterprises (SMEs) contributed $12.3 million.

“One of the keys to improving the national economy is by boosting exports, which not only helps businesses to grow and create jobs, but also generates foreign exchange [forex] reserves to reduce our current account deficit,” President Joko “Jokowi” Widodo said at a virtual press conference on Dec. 4.

Indonesia’s forex reserves stagnated in November at $133.6 billion after booking $133.7 billion in October, supported by government foreign debt withdrawal as well as tax and forex earnings from oil and gas, Bank Indonesia (BI) announced on Monday.

The country recorded its first current account surplus since 2011 of $1 billion in the third quarter, as imports fell faster than exports due to weak domestic demand amid the health crisis, BI’s November data showed. The current account surplus was equal to 0.4 percent of gross domestic product (GDP) and a significant reversal from the $2.9 billion deficit recorded in the second quarter.

Read also: Indonesia books first current account surplus since 2011

Meanwhile, Indonesia’s exports fell 3.29 percent year-on-year (yoy) in October to $14.39 billion, although the figure represented a month-to-month (mtm) increase of 3.09 percent from September, according to Statistics Indonesia (BPS) data. Imports fell steeper by 26.9 percent yoy to $10.78 billion on the same month from the previous year.

“But we cannot be immediately satisfied with this achievement, because there are still plenty of potential export markets that we have not tapped,” the President said.

The World Trade Organization (WTO) has forecast that global trade will shrink between 13 percent and 32 percent this year as an impact of the COVID-19 pandemic.

The global slowdown during the pandemic “has led to a downturn in export markets”, said Jokowi. “But we have to see more clearly the opportunity of export markets that are still wide open in countries that are also fighting the pandemic right now,” he said.

Indonesia has also been pursuing stronger economic ties to spur trade with nontraditional partners, including Latin American and Middle Eastern countries.

Read also: Indonesia expects to ratify trade deal with EFTA soon to attract new investment

Last Friday’s exports were shipped to almost all continents, including destinations such as China, Australia, the United Kingdom, the United States, Mexico, Ghana and Egypt.

Trade Minister Agus Suparmanto said that one of the first-time exporters whose products were among the shipment was a cigar company. Seven SMEs were also first-time exporters of products that ranged from processed foods to candlenut products, shrimp products and cloves, and from to cow mattresses to nipa palm sticks.

In addition, seven large businesses and 11 SMEs diversified their products to contribute exports such as soap noodles and knockdown furniture.

Non-oil and gas exports increased 3.54 percent mtm to $13.76 billion in October from September, but the figure represented a 1.84 percent yoy decline from October 2019.

“This event is a step in boosting non-oil and gas exports during the pandemic [toward] national economic recovery in 2021,” said Agus. “The Trade Ministry will keep encouraging more SMEs and [big] companies to succeed in diversifying their export products and improve their products’ competitiveness.”

He added that the government disbursed Rp 167 billion ($11.8 million) in export financing to 14 SMEs last Thursday to help them improve the competitiveness of their export products.

However, Indonesian Exporters Association (GPEI) chairman Benny Soetrisno said that while he was expecting a rebound in exports next year, exporters were currently facing delays due to issues in sea freight and container availability. He added that the 2021 export rebound was not expected to match pre-pandemic levels, since the sector’s recovery would hinge on COVID-19 mitigation and control in destination countries.

“I think it will take some time. The adjustments may take up to a year until exports and imports get back to normal,” Benny told The Jakarta Post by phone.

Fitch Solutions forecasts a 3 percent yoy contraction in exports of Indonesian goods this year, but yoy growth of 10 percent in 2021. The consultancy forecasts that goods imports will see a deeper contraction of 14 percent yoy this year and see yoy growth of 11.5 percent in 2021.

“We believe that exports will continue to benefit from the V-shaped recovery that China’s economy has been experiencing. China remains Indonesia’s largest trading partner,” said a Fitch Solutions report released on Nov. 30.

BPS data show that exports declined 5.58 percent yoy to $131.54 billion in the first 10 months of the year, while imports fell 19.07 percent to $114.47 billion.