Declining Role of Exports in the Indonesian Economy, Textile Alert
Indonesia's export performance tumbled 10.3 percent month-to-month (m/m) to USD $13.17 billion in April 2017. Suhariyanto, Head of Statistics Indonesia (BPS), attributed this decline to a steep 35.4 percent (m/m) decline in exports of oil and gas products. Nearly all components in the oil and gas balance were plagued by declining prices. However, also in terms of volume these oil and gas exports tumbled, implying weakening global demand for energy (perhaps a sign the Chinese economy remains in slowdown-mode).
But also Indonesia's non-oil and gas exports fell in April 2017, although not as steep as its oil and gas counterparts. BPS said the nation's non-oil and gas exports fell 7.4 percent (m/m) to USD $12.19 billion. This decline was particularly attributed to a steep drop in animal fat and oil exports to India, falling machinery and electrical equipment shipments to Singapore, and declining rubber (and rubber product) exports to the United States.
On the other hand, there were also non-oil and gas export products that showed growth in April 2017 (on a month-to-month basis). For example exports of ores, crust, metal ash, and copper all grew.
Considering Indonesia's oil production and exports have tumbled rapidly over the past decades, non-oil and gas exports now account for around 90 percent of Indonesia's total exports.
Meanwhile, the significance of Indonesian exports toward the country's gross domestic product (GDP) is also on the decline. While in 2014 exports of goods and services contributed 23.67 percent to GDP, this figure fell to 19.08 percent in 2016. The declining role of exports toward the economy, despite generally rising commodity prices, is a worrying sign.
Bhima Yudhistira, researcher at the Institute for Development of Economics and Finance (Indef), says the decline in exports of textiles is particularly alarming, having tumbled more than 20 percent (m/m) in April 2017. This drop is not only attributed to declining demand in the United States and Europe but also to rogue exporters. Illegal shipments of textile are estimated to cause IDR 125 billion (nearly USD $10 million) in missed earnings for the government. Customs have detected 465 cases of smuggling over the January-April 2017 period (while in full-year 2016 it only detected 551 cases of smuggling). Indef therefore recommends the Indonesian government to resolve this issue (illegal textile and clothes shipments).
On a year-on-year basis, however, Indonesia's export performance in April 2017 still forms an improvement compared to the same month in 2016. Indonesia's April 2017 exports grew 12.6 percent year-on year (y/y) compared to the same month one year earlier.