Export Performance of Indonesia Improved But Lags Behind Peers
Enggartiasto Lukita, Indonesian Trade Minister, said the nation's full-year 2017 exports climbed 16.2 percent year-on-year (y/y) to USD $168.7 billion. This is a positive growth pace. However, Indonesian President Joko Widodo, expressed his anger at Minister Lukita as Indonesia's export performance (especially in terms of value) lags far behind its counterparts in the Southeast Asian region.
For comparison, exports of Thailand, Malaysia and Vietnam all reached far above the USD $200 billion mark last year. Considering Indonesia is the largest economy of Southeast Asia - and contains a multitude of mining and agricultural commodities - it is frustrating for Widodo to see the nation lagging behind in terms of exports.
However, when we take a look at export volumes, then Indonesia ranks better in the regional ranking, hence one key problem for Indonesia is that its export products consist of a high amount of low added value products, such as crude palm oil (CPO). Therefore, the government should raise its efforts to push for downstream industrial development in order to become an exporter of added value products.
Another key problem is that Indonesia's logistics costs are notoriously high amid the weak state of its infrastructure, including seaport handling (fortunately the central government has been pushing for infrastructure development across the country, although it will take several years to receive the fruits of this strategy).
Meanwhile, the performance of Indonesia Trade Promotion Centers should be evaluated. These centers, which are spread across 16 cities around the world (and its network may be expanded soon by adding centers in Bangladesh, Russia, and Pakistan), aim at smoothing trade between Indonesia and the world. But one can question whether these centers function optimally.
These promotion centers, combined, cost around IDR 100 billion (approx. USD $7.5 million) each year (taken from the central government's state budget). But reportedly only around 15 percent of these funds go to promotional activities and exhibitions abroad. If more would be spent on promotional activities, then it could impact positively on Indonesia's export performance, especially if it is joined by stronger coordination between the various government ministries and agencies (currently most overseas exhibitions are organized per ministry separately, while in many cases it would be better to coordinate exhibitions with other ministries or government agencies).