Indonesia must export more consumption goods: minister
INDONESIA NEEDS to diversify its exports by shipping more consumption, and not just commodities, in order to turn China's economic rebalancing into an opportunity, Indonesian Finance Minister Bambang Brodjonegoro says.
“Indonesia’s exports to China are declining because we export commodities whereas China is shifting to a consumption-driven economy,” Bambang said.
He said Indonesia also needed to attract more foreign direct investment from China.
China’s economic slowdown and its decision to move away from investment-led growth towards the services sector and a consumer-spending-driven model have significantly affected Indonesia’s exports.
According to a new World Bank report, in the first half of this year, falling exports to China contributed a 2-per-cent decline in Indonesia’s total exports.
This had a crucial impact on trade relations between the two countries, since China has been Indonesia’s second-largest export partner since 2009, with an 11-per-cent average share in total exports up to 2014, the report states. With consumption playing a bigger role in China’s economy, diversifying into manufactured goods and services-based exports would help Indonesia to increase its economic growth, according to the report.
However, Shanti Shamdasan, director of government and policy affairs for Asean at healthcare company Johnson & Johnson, said developing the manufacturing and services sectors to diversify exports would be a great challenge for Indonesia, because even though Indonesia’s exports were currently slowing down, net imports were significantly increasing.
“Indonesia is now trying to back away from a resource-based economy, but we need to acknowledge that Indonesia is a net importer. Thus if Indonesia is going to shift its role as exporter toward manufacturing, the government will still depend on imported goods such as machinery to develop [goods for export],” Shanti said.
In addition, she emphasised the importance of inviting new investment to Indonesia to strengthen its global competitiveness.
“Our players should be ready to take on foreign direct investment. Industries need to be more efficient and government regulations need to focus on letting players stay atop and remain competitive,” she said.
