Monday, 21 December 2009

In 2008 the Indonesian commerce with China suddenly took a sudden reverse into a plunge, resulting in a USD 3.6 billion deficit for Indonesia, while Indonesia still had a surplus of USD 1.1 billion in the previous year.

Even more shocking was that the Indonesian non-gas and oil trade deficit rocketted from USD 1.3 billion in 2007 to USD 9.2 billion in 2008, which was a 600 percent leap. Between January to October 2009 the deficit has reached USD 3.9 billion.

The deficit leap in Indonesia's commerce with China in 2008 was because before 2008 the import data hadn't included goods that came from bonded zones. This means that actually the deficit in the trade with China has begun long time before 2008.

However, with whatever method of calculation, it's definite that the Indonesia-China trade has shown a deteriorating trend in the recent years. Goods from China outpour the Indonesian market.

Now China is Indonesia's main import source, which amounts to 17.2 percent of the total non gas and oil import. On the contrary, China only absorbs 8.7 percent of the total Indonesian non-oil and gas export. This means that the Chinese goods are penetrating our market far more agressively than the other way around.

All the while, the structure of the traded goods tends to be asymmetrical. Primary comodities dominate the export from Indonesia to China, while the import from China to Indonesia are dominated by diverse manufacture products. Consequently our manufacturing industry is heavily threatened.

So far, some of our manufacture products have been left behind to cope with the competition from Chinese merchandises. It seems that our defense is weak in all lines.

No wonder our manufacturing industry is suffering. It's very probable that the early deindustrialization symptoms in the last few years are only exacerbated by the flood of Chinese manufacture products.

"Ignorance" weakens our position further. We feed our 'opponent' with more ammo by supplying mining and energy commodities along with other primary ones; while our own industry is screaming for help due to the lack of energy and raw materials.

It's hard to imagine our products competing head to head with China's unless we can fully utilize our advantage of natural resources, especially those not possessed by China. Therefore we can no longer have our raw resources on sale.

Penetration of Chinese goods

The industries that process domestic raw materials must be supported all out. The centers of industry must be reorganized to be integrated with raw material resources. The technological developments must also be focused that way. In short, we must throw everything we've got.

Complaining and regretting won't change our luck. We have sufficient capital to perform effective maneuvers and strategies.

Begging for postponement on the ASEAN-China Free Trade Agreement (FTA) is possible, but it shouldn't postpone the homework that we've left long over-due.

Wouldn't a postponement have only marginal effect anyway, since the import duty to Indonesia has been below 10 percent for years.

Even if the penetration of Chinese goods could be tackled with a postponement, similar goods would come from other ASEAN countries because the ASEAN FTA is getting closer.

The trade volume among ASEAN countries in 2008 has reached almost USD half trillion. The developed countries are approaching ASEAN. ASEAN trade with Japan, the European Union, China, and America is almost up to 800 billion USD. If combined with the trade with Korea, India, Australia, and New Zealand the number has passed USD 1 trillion.

The rational option is to integrate our economy with the regional dynamics. Asia is proven to be the most dynamic region in the world and has been the spine of the world's economy.

We have a better chance to advance faster if we become part of a regional production network instead of staying away because of our lack of self esteem.

Of course, the way we integrate can't be like Singapore's or Malaysia's. The reason is, we have a relatively large potential for domestic market with our unique geographical condition and our potential on diverse natural resources too. Both can only be put to use realistically if we truly integrate our domestic economy. We have long abandoned this cause. (Faisal Basri, Economic Expert) -