Irvan Tisnabudi& Dion Bisara

Despite a record export performance in December, the government is only forecasting 5 percent export growth this year. Analysts and industry players said this prediction is too pessimistic. (Reuters Photo)

Indonesia Plays it Safe Despite Record Exports in December

The country’s record export performance in December provides some optimism that exports will rebound this year following an overall drop last year, according to experts.

But Minister of Finance Sri Mulyani Indrawati was quick to warn on Tuesday that because the country’s exports have been mostly driven by commodities such as crude palm oil and coal, the performance of the sector would be highly dependent on the price of those raw materials.

Therefore, she said, the government was sticking with its conservative export-growth target of 5 percent this year.

“Because of [high] reliance on raw materials [to support exports] then we also have a big reliance on the fluctuation of its prices,” she said.

The Central Statistics Agency (BPS) revealed on Monday that exports reached a record high of $13.3 billion in December as the initial signs of global economic recovery boosted demand for commodities, particularly from China, the world’s fastest growing economy last year. Full-year exports, however, dropped by 15 percent in 2009.

Despite fluctuations in commodity prices, analysts and industry players seemed more optimistic about the prospects for exports this year.

“Exports [of palm oil] will continue to grow this year,” said Ambono Janurianto, president director of PT Bakrie Sumatera Plantations, a palm oil and rubber plantation company.

Derom Bangun, the vice chairman of the Indonesian Palm Oil Council (DMSI), agreed that the country’s export volume of crude palm oil would rise this year.

“Exports, at least for the first quarter of this year, I think will be good,” said Fadil Hasan, an economist at the private Institute for the Development of Economics and Finance.

He urged the government to do more to boost manufacturing exports by resolving the lingering problems of poor infrastructure, high interest rates and unfavorable policies.

“We don’t want our exports to be too dependent on commodities in the longer run,” he said.

Fadil added that Indonesia would benefit from looking toward fast-growing export destinations such as China, because traditional export markets like Japan and the US are still struggling to recover from the global downturn.

Eric Sugandi, an economist at Standard Chartered Bank, explained that with a solid price outlook for commodities such as crude palm oil, coal and gas this year, Indonesia’s exports will grow, helped by the improving global economy. But he added that in the long term, Indonesia should focus on developing its processing industry rather than just exporting commodities.

“For the long run, Indonesia should process its raw materials more for added value and to decrease the country’s dependence on the volatile commodity prices,” he said, adding that this process will also reduce the consumption of non-renewable resources, which will be good in the long term for Indonesia.

Exports in December jumped 23.9 percent from November and a dramatic 49.8 percent from December 2008, when they had plunged 20 percent.

Full-year 2009 exports still fell 15 percent to $116.49 billion.

Indonesia’s 2009 trade surplus totaled $19.63 billion, more than double the $7.82 billion in 2008.

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