FOCUS : EXPORT GROWTH IN 2008 MAY BE HIGHER STILL THAN IN 2007

INDONESIAN COMMERCIAL NEWSLETTER

July 2008

FOCUS

EXPORT GROWTH IN 2008 MAY BE HIGHER STILL THAN IN 2007

Indonesia gains from the soaring prices of prmary commodities, which make up a large portion of its exports. The country's non oil/gas exports compose mainly of mining products, farm products and resources-based manufactured products such as coal, pulp, timber , CPO, etc.

Indonesia's export value in the first five months of 2008 reached US$ 57.60 billion or an increase of 30.03% from the same period last year. Exports of non-oil/gas commodities rose 22.27% to US$ 44 52 billion in the same period.

In May alone exports rose 17.47% to US$12.89 billion from US$10.97 billion in the previous month. Year-on-year, the exports in May surged 31.41%.

The strong growth in the first five months of this year, gave greater optimism that the export growth in 2008 would be higher than in 2007, when exports grew only 13% from the previous year.

In May, exports of non-oil/gas commodities rose in value 13.94% from US 8. 49 billion to US$ 9.67 billion and exports of oil and gas surged 29.58% from US$ 2.48 billion to US$ 3.21 billion. The increase in the value of oil and gas exports was attributable mainly to 34.79% surge in the export value of crude oil to US$ 1.65 billion and 29.01% rise in the exports of gas to US$1.23 billion. The export value of oil products rose 10.39% to US$ 335.8 million.

The prices of Indonesian crude oil in the world market increased from US$109.31 per barrel in April 2008 to US$ 124.67 per barrel in May. The increase in the oil and gas export earning in May based on data at Pertamina and BP Migas) was caused more by larger export volume of crude oil and oil products. Exports of crude oil rose 18.63% and oil products by 18.31%. Gas exports fell in volume by 1.53%.

The export value of farm and manufactured products grew 48.54% and 25.20% respectively and exports of mining products and other commodities fell 0.43%.

Non oil/gas manufactured commodities contributed 64.81% to the total export earning in the first five months of this year, farm commodities accounted for 3.27% and mining and other commodities accounted for 9.20%. Oil and gas contirbuted 22.72% .

The sharpest increase from April to May among non-oil/gas commodities was recorded in the exports of animal and vegetable fats and oils (HS.No.15) - up US$1,218.6 million and the steepest fall was recorded in the exports of mineral fuels (HS27) down US$48.3 million.

Japan the largest export destination

In the January-May 2008 period, Japan was the largest destination for the country's exports . Exports to that country during that period were valued at US$5,465.6 million or 12.28% of the country's total exports, fllowe dby the United States to which exports were valued at US$ 5,127.2 million or 11.52% and Singapore to wich exports were valued at US$ 4,338.3 millioin or 9.75% of the total epxorts.

Exports of non-oil/gas commodities in May 2008 were valued at US$ 1,110.2 million to the United States, US$ 1, 064.3 million to Japan and US$ 871 million to Singapore - together accouting for 31.48% of the country's total exsports in value.

The highest increase in the exports of non-oil/gas commodities in the same month was recorded in the exports to Malaysia up by US$ 116.7 million, followed by exports to the United States up by US$ 98.6 mllion, China up by US$ 53.2 million , Germany up by US$ 42.7 million, South Korea up by US$ 27.5 million and France up by US$ 4.7 million. Declines were recorde din exports to Singapore by US$ 66 million , Japan by US$ 53.9 million, Australia by US$ 13.9 million, Taiwan by US$ 6.4 million, Britain by US$ 1.3 million. Altogether exports to the 11 main destinations rose 3.82%.

Large imports contribute to increase in exports

High export growth is still expected in the remaining months of 2008 with high increase in the import of industrial basic material and capital goods. In addition to increase in the prices of primary commodities, larger mports will also contribute to boosting production in the country increasing export capacity.

Among the main groups of import commodities other than oil and gas, increase was recorded in the imports of four of them in May compared to the previous month. They included steel, imports of which rose US$ 74.2 million (10.22%), cotton by US$ 30.5 million (17.01 %).

Conclusion

Indonesian exports grew strongly in the first five months of this year faster than export growth in 2007. The strong performance was attributable to rising prices of primary commodities which contribute considerably to the country's exports.

High growth of imports especially imports of basic materials such as steel , chemicals and cotton, as well as capital goods, such as machines and electrical equipment , also contributed to the increase in exports. Increase in the imports of the industrial basic material and capital goods support production contributing to expanding the country's export capacity.

The prices of a number of primary commodities began to slide in mid 2008, but remained high, therefore, strong growth of exports is still expected in 2008 exceeding growth in 2007.

Good performance in exports has sustained the country's economy saving it from new crisis. The consumer sector has also contributed considerably to propping up the economy amid the global economic slow down.