RECENT ECONOMIC REPORTS

INDONESIA: TRADE AND INVESTMENT HIGHLIGHTS 
OCTOBER 2005

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Exports Continue Strong Growth

The Central Bureau of Statistics (BPS) announced on November 1 that Indonesia's exports reached USD 62.3 billion for the first three quarters of 2005, an increase of 21.1 percent year-on-year (YoY).  Non-oil and gas exports accounted for USD 48.3 billion of the nine-month total, and showed a YoY increase of 21 percent.  Meanwhile, January through September 2005 imports grew to USD 43.7 billion, a 30.6 percent increase YoY.  Overall, Indonesia's trade surplus reached USD 18.6 billion for January through September 2005, a 3.9 percent increase YoY.

Table 1: Indonesia: Trade Performance, Jan-Sep 2005 (in USD billions)

 Source: Central Bureau of Statistics (BPS)

Industrial exports, which account for 65.2 percent of total exports, expanded 15.5 percent YoY to USD 40.7   billion from January through September.  Machinery and electrical tools, fats and palm oils, and mechanical tools were Indonesia's top three non-oil and gas exports for the period comprising 10.9, 6.8 and 6.5 percent of total exports respectively.  Japan remains Indonesia’s largest export destination, followed by the United States and Singapore.

Table 2: Indonesia: Top 10 Non-oil and Gas Export Categories, Jan-Sep 2005

(in USD billions)

Source: Central Bureau of Statistics (BPS)

SBY Optimistic Over Export Growth
 

President Susilo Bambang Yudhoyono on October 5 expressed optimism that Indonesia will achieve its export growth target of 6 to 8 percent for 2005.  President Yudhoyono noted that the government would continue to take steps to achieve further growth in exports, such as:

-         Simplifying export procedures and other trade regulations;

-         Developing more efficient distribution systems through improved transportation infrastructure;

-         Improving Indonesia export competitiveness through value-added diversification and bilateral, regional and multilateral cooperation towards greater market access;

-    Promoting and maintaining an Indonesian brand image of high product quality, design and packaging; and

-         Harmonizing tariffs, expediting tax refunds and implementing trade-financing schemes.

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

(in USD billions, FOB value)

Source: Central Bureau of Statistics (BPS)

Table 4: Indonesia: Import by Broad Economic Categories, Jan-Sep 2005 (in USD billions, CIF value)

Source: Central Bureau of Statistics (BPS)

Investment Approvals Rise

According to the BKPM, realized foreign investments reached USD 7.64 billion from January through September 2005, more than double the USD 2.94 billion recorded during the same period in 2004.  Meanwhile, realized domestic investments from January to September 2005 reached Rp 11.97 trillion (USD 1.2 billion), a 21 percent increase YoY.  The transportation, warehousing, communications, chemicals and pharmaceutical sectors have attracted the greatest investor interest in recent months. 

Foreign direct investment (FDI) in Indonesia’s automotive and transportation sector continues to grow.  October 24 BKPM data shows that FDI in the sector reached USD 315.1 million during the first nine months of 2005 and accounted for 4.1 percent of total realized FDI.  According to BKPM, the automotive and transportation sector created some 6,600 jobs from January through September 2005 and ranked 7th largest recipient sector for FDI.  One automotive industry representative in Indonesia, however, noted that the 87 percent increase in gasoline prices on October 1 was already dramatically affecting October 2005 auto sales.

Table 5: Indonesia: Foreign Investment Realization In Automotive and Transportation Sector

Note: (1) January-September.

Source: BKPM

National Trade Negotiation Team

On October 18, President Susilo Bambang Yudhoyono signed Presidential Decree No.28/2005 establishing an interagency “Indonesian National Trade Negotiation Team”.  The team will aim to protect Indonesia’s specific trade interests and enhance its active role in bilateral, regional and multilateral trade forums and negotiations.  

According to the decree, specific objectives include:

-         Enhancing Indonesia's active engagement and asserting and advancing its interests in bilateral, regional and multilateral trade forums and negotiations;

-         Effectively analyzing the substance, processes, results, and impacts of international trade negotiations in the context of protecting and advancing national interests;

-         Formulating Indonesian positions and strategies for trade negotiations with the objective of expanding its global market access and national economic growth; and

-         Educating relevant government agencies and the Indonesian public on the progress and results of international trade negotiations through coordination meetings, workshops, seminars and the print, broadcast and electronic media.

 Key members of the team include:

 -         Coordinating Minister for the Economy (Coordinator);

-         Minister of Trade (Chair);

-         Ministry of Trade Lead International Trade Negotiator (Executive/Vice-Chair);

-         Ministry of Trade Director General for International Trade Cooperation (Executive/Vice-Chair); and

-         Indonesian WTO Ambassador: (Executive/Vice-Chairman).

 Textile Transshipments

Minister of Trade Mari Pangestu on October 13 admitted that transshipments of Chinese textile and garments through Indonesia were increasing.  To combat the problem, Pangestu said the MOT would re-activate the electronic visa verification system (ELVIS), increase pre-shipment inspections (PSI), and restrict the issuance of certificates of origin (COOs) to specific trade offices across Indonesia.  The MOT will also study methods of transshipment in order to develop more effective enforcement measures.

 The MOT on October 7 issued regulations (Decrees No.03/DAGLU/2005 and No.04/DAGLU/2005) governing the issuance of COOs for general and special export products, specifically sensitive items like shrimps and textiles and garments.  The regulations limit the issuance of certificates of origin for shrimp exports to the following 14 trade offices:

-         North Sumatra;

-         South Sumatra;

-         Lampung;

-         Jakarta;

-         West Java;

-         East Java;

-         Central Java;

-         South Sulawesi;

-         South Kalimantan;

-         East Kalimantan;

-         Tarakan City, East Kalimantan;

-         South East Sulawesi;