RECENT ECONOMIC REPORTS

INDONESIA: TRADE AND INVESTMENT HIGHLIGHTS 
AUGUST 2005

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Strong Export Growth Continues               

The BPS announced on August 1 that Indonesia's exports reached USD 47.5 billion for January through July 2005, an increase of 25.8 percent YoY.  Non-oil and gas exports accounted for USD 37.1 billion of the seven-month total, a YoY increase of 27.7 percent.  Meanwhile, January through July 2005 imports grew to USD 33.1 billion, a 31.9 percent increase YoY.  Overall, Indonesia's trade surplus reached USD 14.4 billion for January through July 2005, an increase of 13.4 percent YoY. 

Table 1: Indonesian Trade Performance: January-July 2005

Source : Central Statistic Agency (BPS)

        Industrial exports, which account for 65.5 percent of total exports, expanded 20.7 percent YoY to USD 31.2 billion from January through July.  Pig and poultry fat, mechanical appliances and coal were Indonesia's top three non-oil and gas exports for that period.  Japan remains Indonesia’s largest export destination, followed by the United States and Singapore. 

Table 2: Indonesia's Top 10 Non-oil and Gas Exports

January-July 2005 (In USD billions)

Commodity

Jan - Jul 2004

Jan - Jul 2005

Percent Jan - Jul 2005

Fats and Palm Oils 

2.2

2.6

7.0

Mechanical Appliances

2.0

2.5

            6.9

Coal

1.3

2.3

6.4

Wood and Wood Products

1.8

1.9

5.1

Rubber and Rubber Products

1.6

1.8

5.0

Copper, Ash and Residues

0.6

1.8

4.9

Garments - not knitted

1.6

1.7

4.7

Household Products

0.9

1.1

3.0

Knitted Products

0.8

1.0

2.7

Bronze

0.4

0.6

1.7

Source : Central Statistic Agency (BPS)  

Indonesian agricultural exports to the U.S. through June increased 10 percent over 2004 data.  This increase does not include fish and seafood, which grew by over 35 percent in the first half of 2005.  Shrimp is the principal growth category in the sector, with over USD 180 million exported to the U.S. from January through June 2005, up roughly 47 percent from 2004.    Meanwhile, U.S. agricultural sales to Indonesia continue their robust growth and are fueled by strong cotton, soybean, dairy, and protein feed sales.  U.S. agricultural exports to Indonesia were up over 17 percent during the first half of 2005 YoY.

Table 3: Indonesia: Main Non-Oil and Gas Export Destinations 

January-July 2005 (FOB value, in USD billions)

Country of Destination

Jan - Jul 2004

Jan - Jul 2005

Percent of Total (2005)

Japan

4.5

5.5

14.9

U.S.A

4.5

5.3

14.4

Singapore

2.6

4.1

11.0

China

1.7

2.1

5.8

Malaysia

1.5

1.8

4.9

South Korea

0.9

1.3

3.6

European Union

4.7

5.6

15.2

Taiwan

0.76

1.0

2.6

Australia

0.61

0.6

1.7

Others

7.0

9.5

25.7

TOTAL

29.1

37.1

         100.0

Source : Central Statistic Agency (BPS)

Table 4: Indonesia: Import by Broad Economic Categories

January-July 2005 (in USD billions, CIF value)

Source : Central Statistic Agency (BPS)

Investment Approvals Rise

According to the Investment Coordinating Board (BKPM), foreign investment approvals rose to USD 6.64 billion from January through July 2005, an increase of 79 percent from USD 3.71 billion for the same period in 2004.  BKPM added that the value of actual foreign investment implementation jumped to USD 4.90 billion for the first seven month of 2005, an increase of 97 percent over the same period in 2004.  Meanwhile, domestic investment approvals from January to July 2005 also rose to Rp 31.5 trillion (USD 3.02 billion) from Rp 28.72 trillion (USD 2.76 billion), a 12 percent increase YoY.

GOI Concerns Over Shrimps Transshipments

            Minister of Maritime Affairs and Fisheries Freddy Numberi told the press on August 11 that the GOI will punish Indonesian shrimp exporters involved transshipping shrimp from certain Asian countries through Indonesia to the U.S.  He said that the government will revoke quality certificates issued to those exporters.  Numberi expressed concern that the illegal practice of transshipping could harm Indonesia’s fisheries industry.

GOI to Upgrade Airports in Border Areas

The Ministry of Communications Directorate General of Air Transportation announced on August 16 that it will set up a Technical Executive Unit to facilitate the development of airports in Indonesia.  The unit will be responsible for expanding and modernizing airports in border areas in an effort to boost economic development.  The plan is to create longer runways at some airports to accommodate aircraft as large as a Fokker 27.  The Ministry says the Technical Executive Unit will start working next year with funds from the state budget.

West Java Infrastructure Summit

The West Java Administration signed several memorandum of understandings (MOUs) with foreign and domestic investors on August 19 at the closing of the West Java Infrastructure Summit.  The MOUs include a number of public-private partnerships to develop infrastructure in the province -- such as electricity, toll roads, water supply and waste and water treatment -- as well as non-infrastructure projects such as bonded industrial zones and sugar cane plantations.  According to press reports, foreign investors from China, Singapore, Hong Kong, Malaysia and South Korea were among the signatories of the MOUs.

BPOM Issued New Drugs Import Regulation

Indonesia’s Drug and Food Control Agency (BPOM), an independent state agency, on August 8 announced new regulations requiring that importers report the import of medicine and pharmaceutical basic materials.  The regulation is aimed at preventing the distribution and sale of counterfeit pharmaceutical products, a growing concern in Indonesia.  Authorities suspect that some importers have been falsifying import documents in order to import basic pharmaceutical materials for the production of these products.  Previously, the GOI only required that importers submit import reports to the Ministry of Finance’s Directorate General of Customs.

Bank Ekspor Indonesia Switches Its Function

An August 31 press report notes that PT Bank Ekspor Indonesia (BEI), in addition to providing guarantees for export credits, will also finance the credits directly.  BEI, which was established in 1999, has provided guarantees for 26 percent of Indonesia’s outstanding export credits totaling IDR 30 trillion (USD 2.8 billion).

Indonesia and China Hold Trade Expo in Beijing

The Indonesian Chamber of Commerce and Industry(KADIN), with support from China’s Ministry of Commerce, held an Indonesian Trade, Tourism and Investment Expo from August 30 to September 3 at the China International Exhibition Center in Beijing.  The expo aimed to provide Chinese companies with more information about Indonesian investment opportunities and build long-term economic cooperation between two countries.  Indonesian companies from the oil and gas, tourism, agriculture, fishery and trade sectors attended the expo. During the expo, Indonesia and China reportedly signed an agreement to establish a joint committee to create a roadmap and action plans for the future development of bilateral ties in trade, investment and tourism.  Bilateral trade between the two countries accounted for a reported USD 13 billion last year, and the GOI projects it will increase to USD 30 billion by 2010.

Indonesia and China Sign Agreements Worth USD 5 Billion

In conjunction with the Beijing Indonesian Exhibition on Trade, Tourism and Investment, Vice President Jusuf Kalla reportedly witnessed the signing of MOUs between Indonesian and Chinese corporations on ten projects worth close to USD 5 billion.  The MOUs reportedly include:

• An agreement between Indonesia's PT PGN and China's CNOOC SES Ltd to cooperate in the development of a gas transmission pipeline connecting East Kalimantan and Central Java worth USD 1.2 billion. 

• Technical and business agreements between Indonesia's PT Inti and PT Alcatel Indonesia and China's Alcatel Shanghai Bell on telecommunications products and an Eastern Indonesia telecommunications infrastructure development program worth USD 0.5 billion. 

• An agreement between Indonesia's PT Krakatau Steel, PT Sumbergas Sakti Prima and China's Chengda Eng and Sichuan Chuan Wei Group on the development of iron ore projects in Kalimantan worth USD 1.0 billion.
  
• An agreement between Indonesia's PT Antam and China's Aluminum Corporation of China on a smelter grade aluminum project in Indonesia worth USD 100 million. 
  
• An agreement between Indonesia's PT Jamsostek and PT Transpacific Securindo and China's Hualing Group on investment cooperation in Indonesia’s medical sector worth USD 1.0 billion
  
• An agreement between Indonesia's PT Jamsostek and PT Transpacific Securindo and China's Hualing Group on investment cooperation in housing development in Indonesia worth USD 1.1 billion.  
  
• A cooperation agreement between Indonesia's PT Sumber Alam Sutra and China's Si Chuan Guo Hao Zhong Ye for the development of hybrid rice seed in Indonesia.

• A cooperation agreement between AG Networks Associates and Guancai Energy on development projects in Riau Islands Province.

• An agreement by the Indonesian Association of Partnership of Sugar Traders and Farmers (AKANI) and Chinese National Technical Import and Export Corporation to conduct a feasibility study on creating a self-sufficient sugar industry in Indonesia by 2009.

§     An agreement between Indonesia's Dizamatra Powerindo and China's National Electric Cable and Wire Import-Export Corporation on the development of the Sibayak geothermal power plant in North Sumatra worth USD 12 million.

***

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