On Saturday, Feb. 2, The Jakarta Post
reported that according to the latest data issued by the Central Statistics
Agency (BPS), Indonesia suffered its first-ever annual trade deficit in
2012 of US$1.65 billion.
A drop in Indonesian exports to 6.61 percent was attributed to declining
demand from the nation’s major trading partners due to the global economic
slowdown. At the same time, Indonesia recorded an increase in imports of
8.2 percent.
Trade Minister Gita Wirjawan expressed his concern and issued a warning
that Indonesia’s exports for 2013 might remain stagnant, considering
continued reduced demand from the nation’s major trading partners, such as
the US, Japan and Europe. However, there is no strong ground for feeling
anxious over this situation.
According to popular knowledge, the trade performance of a country is based
on the total value of exports minus imports. In a shrinking world where
interdependence between economies continues to grow, those who favor
exports and think of imports as measure of success or failure for a
nation’s economic performance disregard what is called production sharing
networks.
Nowadays, most goods are no longer produced by one specific nation.
Remember the classic dispute of Toshiba in the US legal system in the
1980s, when representatives of the well-known brand successfully argued
that it was entitled for consideration as an American-made product. Take
also the case of McDonalds in Indonesia, when a group of infamous people
campaigned for a boycott of the fast-food restaurant because of its background
as an American brand, only to later learn that the chain restaurants in
Indonesia were fully owned by Indonesians.
Therefore, international trade requires a new way of examining the links
between trade, production, investment and the role of services as well as
the role of government to guide national trade policy and an international
body to serve as dispute settlement mechanism among countries.
Scholars who express anxiety over Indonesia’s latest trade statistics
should review the data made available from the BPS. Indonesia’s trade
deficit in 2012 was caused by an 8.2 percent increase in imports, driven by
imports of intermediary goods for local production (73.1 percent), followed
by capital goods (19.9 percent) and consumer goods (7 percent). Thus, in
order to be correct, this figure for a $1.65 billion deficit needs to be
deducted from goods purchased inside the country.
Trade statistics are based on the unit value of goods and therefore,
exclude the factor of production sharing, where exporters import the parts
and components needed for production. Production sharing implies a
dependency on exporters to import components in order to do business.
Eventually, a distortion of the nation’s trade statistics occurred.
In a shrinking world of interdependent economies, international trade
requires a new paradigm, and, as a response, the country’s trade statistics
needs to renew its approach for data recording, where, unlike before, the
per-unit value of goods has become less important.
Deputy Trade Minister Bayu Krisnamurthi, as reported by The Jakarta Post on
Feb. 5, attributed the increase in exports for processed products in 2012
to the government’s successful policy in limiting the export of raw
materials. He highlighted that a Trade Ministry regulation restricting the
export of raw rattan issued in 2011 boosted exports of rattan furniture to
26 percent in 2012.
This approach, aiming for 100-percent made-in Indonesia, does not suit the
capability of small or minor companies and hampers people’s interests as
entrepreneurs, as the case in Palangkaraya, Central Kalimantan. ●
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