China has replaced the United States as the second largest consumer of Indonesia's nonoil exports after Japan. This has happened because of the extraordinary growth in the Chinese economy leading to a greater demand for basic materials from Indonesia. China's demand for basic materials presents an opportunity for the growth of Indonesia's agricultural industries.
Indonesia's Export Growth
Rusman Heriawan, Central Board of Statistics (BPS) chief, laid out in Jakarta on, the figures on Indonesia's exports for January 2010, which reached a value of $11.57 billion. This amount is 13.29 percent lower than exports in December 2009, but higher by 58.99 percent compared to exports a year earlier, in January 2009. Exports in January 2009 plummeted as a result of the global financial crisis that began in the middle of 2008.
The nonoil exports for January 2010 totaled $9.23 billion. Japan remains the main consumer of Indonesian exports in the amount of $1.32 billion. China is now in the second position with $1.01 billion, replacing the United States, which is now in the third position with $997.7 million, and the European Union, which consists of 27 nations, which imported $1.05 billion worth of Indonesian goods.
This is the first time that China has occupied the position of second largest importer of Indonesian goods. This represents an opportunity for Indonesia to carry out trade with China. Commodities such as unprocessed palm oil, mineral ores, rubber and furniture have the potential for growth in trade with China.
Indonesia-China Trade Ties
The trade between Indonesia and China, especially in natural commodities, has been rising for the last several years. The US market, on the other hand, has been hurt by the global financial crisis and the protectionism of its domestic market has caused Indonesian exports to that country to slowly decline.
China's need for basic commodities from Indonesia must be exploited by Indonesia to raise the level of its exports to that country. In addition to being able to increase the volume of bilateral trade with China, Indonesia could also enjoy the benefits of greater market access to countries other than China. Indonesia can use this opportunity to raise its midterm and long-term export performance.
Indonesia will get dual benefits from its trade with China. That is, to its markets and through guarantees to supply basic agro industrial materials. China is one of the largest consumers of vegetable oils in the world, beside India.
According to the Joko Supriyono, Indonesian Association of Palm Oil Manufacturers secretary general, Indonesia has the opportunity to raise its exports of unprocessed palm oil by two million tons in 2010. China now imports six million tons of unprocessed palm oil and 500,000 tons of palm kernel oil each year.
Effects of ACFTA Still Not Reflected
Export figures for January 2010 do not yet reflect the effects of the ASEAN-China Free Trade Agreement (ACFTA), which came into force on 1 January 2010. But he was optimistic that Indonesia could make use of ACFTA to increase its exports to China. Basically, if ACFTA is seen as a threat, it could have negative effects; but, these effects could be mitigated if we make good use of the opportunities before us. If our deficits keep going down, and our export and import positions equalize, then Indonesia could seize a big opportunity.
In the manufacturing sector, Indonesian products, especially textiles, will have a hard time competing with those from China. Therefore, the government needs to strengthen its industrial policies to support the manufacturing sector to increase the volume and value of exports to China. If nonoil exports rise, then Indonesia can reduce its foreign trade deficit with China, which in January 2010 reached $366 million.
Restoring Economy
Indonesia could use the opportunity to restore its economy and stimulate exports. A reviving economy will raise demand and will be an opportunity to raise prices to the level that export values of natural commodities will increase as well.
China will continue to dominate the international market. Indonesian exporters must strive to maintain their market position to obtain even greater opportunities. In my opinion, China will continue to outpace the US as a target for exports. From Indonesia's own point of view, the market has now shifted to Asia, with a relatively mature consumer market in China.
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