RECENT ECONOMIC REPORTS

Indonesia's Exports to Asia

1. Summary: Indonesia's rich resource base and the relatively inelastic demand for oil and gas in its primary Asian Markets may protect its export performance as it faces changing demand conditions in Asia during the region's economic crisis. Oil and gas products and other resource-based products dominate exports to Asia, especially to Japan and South Korea, two of Indonesia's most important Asian markets. The most vulnerable of Indonesia's industries to Asia's economic downturn appears to be plywood. End summary.

2. Introduction: This report considers Indonesia's exports to Asian markets as a baseline to assess the impact of the economic downturn in Asia on Indonesia's export performance and foreign exchange earnings. Twelve export markets were included: Japan, South Korea, Taiwan, PRC, Hong Kong, Australia, and ASEAN (Brunei, Malaysia, the Philippines, Singapore, Thailand, and Vietnam). In 1996, Indonesia's exports totaled $49.8 billion, with non-oil and gas exports of $36.9 billion representing 74.1 percent. Export growth was 9.7 percent in 1996 (with oil and gas up 11.8 percent and non-oil and gas up 8.9 percent) while import growth was 5.7 percent (oil and gas up 23.5 percent and non-oil and gas up 4.3 percent).

Trends in Exports to Asian Markets (1991-1996)

3. In 1996, the 12 markets considered took $30.2 billion or 60.6 percent of Indonesia's total exports; the 1991-96 average was 62.3 percent. Japan remains Indonesia's primary export market, but its share of total exports has fallen steadily prom 36.9 percent in 1991 to 25.9 percent in 1996. Growth in Asia has come largely from ASEAN markets whose share of Indonesian exports rose from 11.6 percent in 1991 to 15.2 percent in 1996. (see Table I.)

Table I: Summary of Indonesian Exports (USD Billion)

Source: Indonesian Central Bureau of Statistics

4. In the five year period 1991-1996, Indonesia's overall exports rose 71 percent. That period saw strong growth in Indonesia's exports to many Asian markets, especially to ASEAN. Exports to the six other ASEAN countries grew 126 percent, led by a trebling of exports to the Philippines, more than doubling of exports to Malaysia and Thailand, and 89 percent growth in exports to Singapore. There was also strong growth in other Asian markets - exports to Australia were up 91 percent, to the PRC were up 72 percent, and to Hong Kong were up 131 percent. In contrast, Indonesian exports to Japan, starting from a larger base, grew only 9.7 percent during that period. (see Table II.)

Table II: Trends for Indonesia's Top Asian Export Markets (USD Billion)

SOURCE: INDONESIAN CENTRAL BUREAU OF STATISTICS COLUMNS MAY NOT TOTAL 100 PERCENT DUE TO ROUNDING

COMPOSITION OF EXPORTS TO ASIA

5. Oil and Gas Products: Energy products dominate Indonesia's exports to Asian markets. In 1996, approximately 40 percent of Indonesia's trade to these twelve markets was oil, gas and coal products. Exports of just two products - crude petroleum and liquified natural gas (LNG) - made up 29.2 percent of exports to these twelve markets at $4.73 billion (15.8 percent) for crude oil and $4.02 billion (13.4 percent) for liquified natural gas. Moreover, petroleum and LNG dominated exports to two important but vulnerable markets - Japan and South Korea. (see Table III.) Following are illustrations from 1996:

- Japan: oil and gas products accounted for 45.5 percent ($5.86 billion) of total exports to Japan in 1996.

- South Korea: exports to South Korea were led by natural gas at $0.87 billion (26.5 percent), crude petroleum at $0.54 billion (16.5 percent), and refined petroleum products at $0.38 billion (11.5 percent).

- People's Republic of China: Crude petroleum accounted for 50.4 percent ($1.04 billion) of Indonesia's $2.06 billion in exports to the PRC.

- Taiwan: Coal, natural gas, crude petroleum and refined products combined accounted for 47 percent ($0.75 billion) of Indonesia's total $1.61 billion of exports to Taiwan.

- Australia: Exports of crude petroleum represented 54 percent ($0.65 Billion) of Indonesia's $1.2 billion in exports to Australia.

- Singapore: Crude petroleum and refined petroleum accounted for 16.0 percent ($0.73 billion) of total exports to Singapore.

- Thailand: Crude petroleum was Indonesia's top export, accounting for 14.6 percent ($0.12 billion) of total exports of $0.82 billion. Coal comprised 9.5 percent ($0.08 billion) of exports to Thailand.

Table III: Indonesia's Oil, Gas And Coal Exports to Select Asian Markets 1996 (USD Million)

Source: Indonesian Central Bureau of Statistics;

Liquified gasses includes LNG, Liquified Butane, and Liquified Propane; Oil products includes partially refined crude and distillates.

6. Other resource-based products: these items also figure prominently in Indonesian Exports to Asian Markets. Copper and nickel ores and coal accounted for $1.21 billion (9.4 percent) of exports to Japan. Copper ores and concentrates contributed $0.17 billion (5.2 percent) of total export earnings from South Korea. A significant 32.2 percent of Indonesia's $0.688 billion in exports to the Philippines consisted of copper ores and concentrates.

7. Manufactured goods: Asian markets in which export performance was driven by manufactured goods and/or non-resource based products included Singapore, Hong Kong, Malaysia, and Thailand.

- Singapore: Indonesia's non oil and gas exports were led by electronics at $0.8 billion (17.5 percent), jewelry, goldsmith and silversmith wares at $0.44 billion (9.6 percent), tin at $0.22 billion (4.8 percent), natural rubber latex at $0.17 billion (3.7 percent).

- Hong Kong: Exports of fabrics and textile yarn accounted for $0.28 billion (17.2 percent) of total exports to Hong Kong, followed by veneers and plywood at $0.22 billion (13.5 percent) and paper and paperboard $0.15 billion (9.2 percent).

- Malaysia: Top exports were fixed vegetable fats at $0.09 billion (8.2 percent); machine parts at $0.08 billion (7.0 percent); paper and paperboard at $0.08 billion (7.2 percent), coal at $0.06 billion (5.8 percent); and tobacco at $0.05 billion (4.6 percent)

- Thailand: Leading manufactured exports included fish at $0.11 billion; telecom equipment and ADPS at $0.05 billion; ships and boats at $0.03 billion; and fabrics and textile yarn at $0.05 billion.

8. Plywood Industry: One of Indonesia's export industries most vulnerable to the regional economic downturn is plywood. Representatives from the Plywood Producers Association (APKINDO) indicate that plywood exports fell by more than 30 percent to major Asian markets last year and that market prices had fallen considerably as well.

9. Plywood exports totaled $3.59 billion in 1996 (7.2 percent of total exports), with 42.1 percent ($1.51 billion) going to Japan. South Korea took 8 percent ($0.29 billion) while Hong Kong, the PRC and Taiwan each took about 6 percent each. Together, these five markets represented 76 percent of Indonesia's total plywood exports. (see Table IV.)

Table IV: Indonesia's 1996 Plywood Exports to Major Asian Markets (USD Million)

Source: Indonesian Central Bureau of Statistics

9. Conclusion: Indonesia's rich resource base and the relatively inelastic demand for oil and gas in its primary export markets may be the saving grace for export performance as it faces changing demand conditions in Asia during this economic crisis. Indonesia has emphasized development and performance of its non-oil and gas exports to create jobs and lessen dependence on its natural resource base. In 1985, oil and gas exports accounted for 70 percent of Indonesia's total exports but since 1993 they have accounted for less than 30 percent of total export earnings. But Indonesia now faces slack growth in all three of its top manufactured export industries - textile products, footwear, and wood products, which accounted for 36.4 percent of total non-oil and gas exports in 1996 because of slowed demand for footwear and textiles in the United States and European Union and now with slackening demand in Asia for its wood products exports. Despite possible price and demand declines, energy and mineral products continue to provide a significant net foreign exchange-earning foundation for Indonesia's trade outlook. To preserve export earnings, Indonesia is fortunate that it can fall back on its resource base as its market face hard times.

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