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Manufacturers Look Close to Home in Bid to Boost Exports by a Third
Faisal Maliki Baskoro | July 18, 2011

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Exports from the manufacturing industry will climb to $134 billion by 2015, up more than a third from last year, according to new government forecasts, as shipments of palm oil and natural gas to Southeast Asian neighbors grow.

Industrial exports are expected to rise an average of 8.3 percent a year over the next four years, Industry Ministry official Agus Tjahajana Wirakusumah said on Monday.

The ministry estimated industrial exports would reach $98 billion this year, little changed from last year’s figure. However, shipments are expected to rise to $112 billion next year and decline to $96 billion in 2013 before rebounding to $115 billion in 2014, Agus said.

“Our expectation [for 2011 to 2015] is a moderate-pessimistic estimate, but with increased investment and incentives to stimulate domestic industry, there’s a high possibility that we will exceed our expectations,” he said.

The government is betting its blueprint for economic growth will help achieve the goal. The government is formulating incentives such as tax holidays and tax allowances for certain projects in the country’s Rp 4,000 trillion ($470 billion) economic growth master plan, known as the MP3EI.

The ministry is halfway to meeting its target for industrial exports this year, Agus said. According to Central Statistics Agency (BPS) data, industrial exports from January to May hit $50 billion, up 36 percent from the same period last year.

“The agriculture industry is still our biggest contributor, and it is expected to remain that way until 2015, growing by an average of 13 percent until 2015,” Agus said. In 2015, exports of palm oil are expected to reach $24 billion from $16 billion last year, and rubber $19 billion from $9 billion last year.

“In terms of [export] destination, we’re expecting significant growth to Thailand, Malaysia, and the Philippines,” Agus said. “The penetration of Southeast Asia, our biggest export destination, is still relatively low, so there’s still potential to boost exports.”

He said Thailand was expected to be the main destination for non-oil and gas exports. Shipments to Thailand and Malaysia could rise by about 12 percent per year until 2015, while climbing 11 percent a year to the Philippines.

The industrial sector accounted for 62 percent of last year’s $123 billion in exports that did not include oil and gas.

For countries outside the Association of Southeast Asian Nations, China will be the main export destination in the next four years, Agus said, with shipments to the world’s second-largest economy likely to amount to more than 10 percent of total exports.

“Other countries such as India and South Korea also possess good market potential,” he said. “The ministry will keep promoting profitable export destinations to local industries.”

The ministry had set a target for industrial growth at 5.2 percent to 6.1 percent this year.