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5.09.2009

Indonesia's exports need boost

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Indonesia has several highly competitive export commodities that have yet to gain a greater share in international markets due partly to lack of overseas promotion.

A recent study by the central bank has suggested 20 categories of products with high productivity and revealed comparative advantage (RCA) but having only minor shares in export markets.

RCA is defined as a macroeconomic concept for calculating the relative advantage or disadvantage of a given country in a certain technological field.

Among the commodities that fail to live up to their potential are rubber-made goods, pulp and paper.

"For non-favored export commodities, like pulp and paper products and rubber-made products we have small export market shares but high productivity and RCA levels," the central bank said in its study.

"Shares of such commodities against Indonesia's total exports can be further increased."

However, the Industry Ministry's director for forestry and plantation product industries, Aryan Wargadalam, and the Indonesian Pulp and Paper Association (Apki) chairman H M Mansyur said pulp and paper were already among the top 20 export commodities.

"Pulp and paper are part of our main export commodities, and it's there in our policy. Their exports even reach some US$4 billion annually," Aryan told The Jakarta Post recently.

The Industry Ministry and the Trade Ministry had both "supported" the development of the pulp and paper industry because the sector was competitive in the global market, with the country being "the ninth largest pulp producer and the 11th largest paper producer in the world". according to Mansyur.

He said pulp and paper exports amounted to $4.5 billion in 2008 and $4.2 billion in 2007.

By comparison, non-oil and gas exports amounted to $107.8 billion in 2008, 17 percent up from $92 billion recorded in the previous year, according to the Central Statistics Agency (BPS).

Unlike pulp and paper, rubber-based products, however, performed poorly in the international market despite their competitiveness.

The Industry Ministry's direc-tor for downstream chemistry industry Tony Tanduk said the rubber-made product industry was still underdeveloped.

"The issue lies in high precision and standards required by *rubber-made product* buyers.

*These requirements are hard to meet* as most rubber-made products are still produced by small and medium-scale companies," he told the Post.

"As a result, even our buyers tend to have their own suppliers, usually from overseas," he said.

Tony said a memorandum of understanding (MoU) arranging partnerships should be made between local producers and buyers as a first step towards addressing this issue.

Indonesia is the world's third largest rubber producer after Thailand and Malaysia.

Indonesia's top 20 export commodities

No. Commodities-------Average shares to total exports between 2000 - 2007
1. Crude oil and its products---11.5%
2. Natural gas and its processed products---9.3%
3. Garments---6.6%
4. Vegetable oil and fat---5.0%
5. Woven goods and textiles---4.6%
6. Metal ores and residue---4.6%
7. Telecommunication devices---4.5%
8. Electrical machinery and its devices---4.3%
9. Coal, coke and briquette---4.1%
10. Wooden and styrofoam goods---4.1%
11. Office machines---3.4%
12. Paper---3.2%
13. Raw rubber---2.8%
14. Non-iron contained metals---2.5%
15. Fish, clams and mollusk---2.4%
16. Tools---2.3%
17. Organic chemicals---2.1%
18. Footwear---2.0%
19. Other industrial goods---2.0%
20. Coffee, tea, chocolate, spices---1.8%

Cumulative shares of top 20 commodities---83%
Source: United Nations Commodity Trade (COMTRADE), processed by the central bank.(AP:MA)

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