RECENT ECONOMIC REPORTS

INDONESIA: TRADE AND INVESTMENT HIGHLIGHTS 
SEPTEMBER 2005

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Exports Continue Strong Growth

                The Central Statistics Office (BPS) announced on September 3 that Indonesia's exports reached USD 54.8 billion for January through August 2005, an increase of 23.9 percent year-on-year (YoY).  Non-oil and gas exports accounted for USD 42.6 billion of the eight-month total, a YoY increase of 24.5 percent.  Meanwhile, January through August 2005 imports grew to USD 38.6 billion, a 32.2 percent increase YoY.  Overall, Indonesia's trade surplus reached USD 16.2 billion for January through August 2005, an 8.0 percent increase YoY.

Table 1: Indonesian Trade Performance: January-August 2005

Source : Central Statistic Agency (BPS)

        Industrial exports, which account for 65.5 percent of total exports, expanded 18.6 percent YoY to USD 35.8 billion from January through August.  Machinery and electrical tools, fats and palm oils, and coal were Indonesia's top three non-oil and gas exports for the period comprising 10.9, 6.9 and 6.4 percent respectively.  Japan remains Indonesia’s largest export destination, followed by the United States and Singapore.

Table 2: Indonesia's Top 10 Non-oil and Gas Exports

January-August 2005 (In USD billions)

Commodity

Jan-Aug 2004

Jan-Aug 2005

Percent of Total 
Jan - Aug 2005

Mechanical Appliances 

4.0

4.6

10.9

Fats and Palm Oils

2.7

2.9

            6.9

Coal

1.5

2.7

6.4

Rubber and Rubber Products 

1.9

2.2

5.0

Copper, Ash and Residues 

0.8

2.0

4.7

Wood and Wood Products

2.0

2.0

4.7

Garment - not knitted

1.8

1.9

4.6

Nickel

0.4

0.7

1.7

Tin

0.3

0.5

1.4

Steel and Iron Steel

0.2

0.4

0.9

Source : Central Statistic Agency (BPS)

Table 3: Indonesia: Main Non-Oil and Gas Export Destinations 

January-August 2005 (FOB value, in USD billions)

Country of Destination

Jan - Jul 2004

Jan - Jul 2005

Percent of Total (2005)

Japan

5.2

6.2

14.6

U.S.A

5.3

6.1

14.4

Singapore

2.9

4.8

11.2

China

2.1

2.5

5.9

Malaysia

1.8

2.0

4.9

South Korea

1.1

1.5

3.6

European Union

5.5

6.4

15.1

Taiwan

0.9

1.1

2.6

Australia

0.7

0.7

1.7

Others

8.4

11.0

26.0

TOTAL

34.2

42.6

         100.0

Source : Central Statistic Agency (BPS)

Table 4: Indonesia: Import by Broad Economic Categories

January-August 2005 (in USD billions, CIF value)

Investment Approvals Rise

According to the BKPM, foreign investment approvals rose to USD 7.28 billion from January through August 2005, an increase of 73.3 percent from USD 4.20 billion for the same period in 2004.  Meanwhile, domestic investment approvals from January to August 2005 also rose to Rp 33.3 trillion (USD 3.2 billion) from Rp 31.6 trillion (USD 3.1 billion), a 5.2 percent increase YoY.

GOI to Review Export Regulations

MOT Director General of International Trade Diah Maulida announced on September 19 that her directorate is reviewing export regulation aimed at tightening procedures for textile and garment exports.  Existing regulations authorize the MOT to issue certificates of origin (CO) for Indonesian textile and garments exports.  MOT is now considering restricting the issuance of Cos to specific areas of the country.  Specifically, only trade offices in certain textile and garment production areas in Java, North Sumatra, Batam, Bali and Bonded Zones would issue certificates of origin.  Media reports noted, however, that it is easy to acquire a fake CO in Indonesia, which has encouraged illegal transshipment of textile and garments product from other Asian countries through Indonesia.

GOI to Allow Sugar Imports

Minister of Trade Marie Pangestu announced on September 12 that the MOT would issue new permits for the importation of between 200,000 to 250,000 tons sugar from mid-October and likely through April 2006.  The move is designed to meet domestic sugar demand during the month of Ramadan (October 5 – November 4).  Pangestu also said her Ministry was studying whether it would be necessary to approve more licensed sugar importers.  At present, Indonesia has four designated sugar importers: state plantation companies PTPN IX, PTPN X and PTPN XI, and PT Rajawali Nusantara. 

New Investment in Footwear Sector

Minister of Trade Mari Pangestu announced on September 7 that Korean footwear manufacturer Poong Won will invest USD 30 million in Indonesia this year as part of its regional production relocation strategy.  Poong Won is a licensed producer of the German sportswear brand Adidas and plans to relocate 24 percent of its current production in China to Indonesia and Vietnam.  Poong Won plans to establish a factory this year in Indonesia with seven footwear production lines, creating some 7,000 jobs.  The Indonesian Footwear Association (Aprisindo) expressed optimism that Indonesia's footwear exports would reach USD 1.6 billion in 2005 compared to USD 1.35 billion in 2004.  With upcoming new investments in the sector, Aprisindo predicts that Indonesian footwear exports will exceed USD 2 billion in 2006 and USD 4 billion by 2010.

Lion Air Procures Boeing Aircraft

Indonesia’s discount carrier Lion Air announced on September 7 that it had finalized a contract to purchase 60 new Boeing 737-900 ER aircraft worth USD 3.9 billion.  The contact follows a June 30 agreement in which Lion Air agreed to purchase 30 units of the 737-900 ER and 30 units of the 737-800 or 737-900.  Delivery of the aircraft will occur from early 2007 through 2009.

GOI Exempts Vehicle Spare Parts from Import Duty

According to a September 8 media report, the GOI has exempted some motor vehicle spare parts from import duties, specifically those used to assemble motors for export.  Imported spare parts will still require a surveyor’s certificate of inspection.  Importing companies will also need to submit their annual import and export plans, along with information about their installed capacity and export contracts with foreign buyers.

Domestic Auto Sales Accelerate

The Indonesian Automotive Industries Association (Gaikindo) announced on September 9 that car sales in the first eight months of 2005 reached 395,728 units, an increase of 29.4 percent from the same period in 2004.  In August alone, sales rose to 50,562 units, an increase of 30.7 percent YoY.  According to Gaikindo, commercial vehicles made up the bulk of August sales. 

Table 5: Indonesia: Automotive Sales (unit)

Year

August 2005

January - August 2005

2005

50,562

395,728

2004

38,676

305,848

2003

30,052

234,120

2002

27,215

212,993

2001

27,471

202,555

Source: Gaikindo, compiled with other sources.

Indonesian Global Investment Forum

The Office of the Coordinating Minister for Economy and the Investment Coordinating Board (BKPM), with support from the Euromoney Investment Information Services Firm, held Global Investment Forums in London (September 8-9) and New York (September 15-16).  The forums were aimed at attracting foreign investment to Indonesia, increasing Indonesian exports, and updating foreign investors on Indonesia’s economic outlook and the GOI’s overall economic strategy.  According to BKPM Chairman Muhammad Luthfi, Indonesia needs roughly USD 426 billion in investment to sustain an annual economic growth of 6.6 percent until 2009. 

U.S. Department of State Assistant Secretary for Economic and Business Affairs E. Anthony Wayne addressed the forum in New York on September 15.  Assistant Secretary Wayne expressed hope that growing U.S. investment in Indonesia will contribute to the GOI’s overarching goals of promoting long-term economic growth, creating jobs, and reducing poverty.  Assistant Secretary Wayne also added that sound economic policies and good governance are key contributors to economic growth and sustainable development.  He said he believed that the GOI was on the right track in setting an ambitious agenda to curb corruption, attract investment, and stabilize the economy.

Indonesia Criticizes Insurer Lloyds

A September 12 Office of Coordinating Ministry for the Economy newsletter criticized international insurer Lloyds Insurance’s July decision to designate the Malacca Strait as a “war risk” area, a move that increased insurance premiums for shippers using the Strait. 

Ports and Shipping Conference in Surabaya

Minister of Transportation Hatta Rajasa opened the “Third ASEAN Ports and Shipping Conference” in the East Java city of Surabaya on September 21-22.  The conference aimed to strengthen existing relations among ASEAN port regulators, in particular nurturing information exchanges and problem-solving among port administrators.  Global issues related to transportation and logistics were the main topics of discussion.  As many as 200 participants from 15 countries attended the conference.

GOI to Tender 3G Networks

The Minister of Communication Sofyan Djalil announced on September 26 that the government will hold a third-generation services (3G) auction in November.  The auction will allow international mobile phone service providers to bid on the provision of 3G services, such as mobile video and internet.  Telkomsel, Indosat and Excelcomindo are three Indonesian mobile phone operators actively pursuing licenses to operate 3G networks in Indonesia.

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