Indonesia recorded a rebound in exports in the first quarter of this year after suffering a severe blow by the global financial crisis in 2009. The country recorded a 15% contraction in exports in 2009 with oil and gas exports shrinking 34.7% and exports of other commodities diving 9.6%. The oil price fall after peaking in July 2008 was a major contributor to the poor overall performance in exports in 2009.
Among the commodities other than oil and gas, the sharpest fall of 16.9% was recorded in the exports of manufactured products. A strong growth of 31.9% was still recorded in the exports of products of general mining thanks mainly to high prices of primary commodities like coal, nickel and tin. The agricultural sector was also relatively safe from the battering of the global financial woes thanks to strong demand for primary commodities like CPO, cacao and rubber, although a slight decline of 4.8% was still recorded in the exports of agricultural products.
Weak demand in major traditional export markets such as the United States, Japan and Europe, which were badly hit by the global crisis, caused the poor performance in the exports of manufactured goods.
The trend toward recovery of the world economy since the last quarter of 2009 signaled an improvement in the country's exports of manufactured goods. The favorable trend continued through the first quarter of 2010.
In the first three months of 2010, the country's exports shot up more than 50% to US$ 35.39 billion from US$ 23.03 billion in the same period in 2009. The oil price also began to pick up reaching the levels of US$ 75 - US$ 80 per barrel up from US$ 60 early 2009 resulting in an increase in export earning.
Similarly, the export value of manufactured commodities surged 37.5% to US$ 21.1 billion in the first three months of 2010 from the same period last year.
The surge in the export was thanks mainly to exports of mining products which contributed US$ 6.69 billion or almost doubling export value of US$ 3.41 billion in the same period last year.
A sharp increase was recorded in the exports of minerals in the first quarter of 2010 compared with the same period last year. More than two fold increase was recorded in the exports of coal to US$ 4.75 billion from US$ 2.23 million. Exports of iron ore and metal dust surged 47.9%, exports of copper by 121% and aluminum by 25.6%.
A 47.9% rise was recorded in the exports of paper, mechanical equipment/machines and non knitted finished wear garment
Major agricultural commodities include CPO exports of which rose 26.9% and rubber the exports of which increased 110%.
The global financial crisis changed the position of the traditional markets of Indonesian commodities. The position of the United States as the second largest market for Indonesian commodities has changed in favor of China. In 2008, the United States accounted for 11.6% of Indonesian exports but the percentage began to decline to 10.4% so far this year.
China previously, was market for 7.2% of Indonesian commodities in value, took over the second position from the United States by buying 10.7% of Indonesian exports. Japan still maintains its position as the largest market accounting for 11.6% of Indonesian exports since 2008.
The position of the European Union also declined as the market for Indonesian commodities other than oil and gas from 14.3% in 2008 to 13.8% in the first quarter of 2010.
Exports and imports grew at the same time in the first quarter of 2010. In 2009, imports shrank 21% compared with the previous year. In the first quarter of 2010, imports were valued at US$ 23.8 billion up from US$ 15.9 billion in the same period in 2009.
Imports of Indonesia are still dominated by basic materials and auxiliary materials to feed the domestic manufacturing industry. In the first quarter of 2009, imports of basic materials and auxiliary materials were valued only at US$ 13.5 billion - up sharply by 62.3% to US$ 21.9 billion in the first quarter of 2010.
Imports of capital goods also began to pick up - from US$ 4.2 billion in the first quarter of 2009 to US$ 5.9 billion in the first quarter of 2010.
Mechanical equipment/machine and electrical machine/equipment are the biggest groups of goods imported into the country. The two groups of gods are used much in the manufacturing and infrastructure sectors.
The increase in the imports of steel, chemicals and plastics, which are used much in the manufacturing industry, indicates the revival of the manufacturing sector.
China has emerged as the largest country of origin for goods imported by Indonesia. In 2008 China accounted for 15.2 % of the country's total imports. The percentage rose to 17.4% in 2010. Japan remains the second largest supplier of goods for Indonesia contributing 15% to the country's total imports every year.
The United States succeeded in increasing its shares of the Indonesian market during the height of the crisis. In 2009, the United States contributed 9.4% to Indonesia's imports up from 7.8% in 2008. A decline was recorded by the EU from 10.7% to 8.6% in contribution to Indonesia's imports.
The country's export and import growth in the first quarter of 2010 indicated the revival of the country's manufacturing sector. It also indicates that many of the country's commodities are still competitive not as bad as feared or described by many.
The increase in exports has not necessitated capacity expansion. In fact new investment has not caused significant increase in the capacity of the country's manufacturing sector. This could be seen from the imports of capital goods. There was no significant increase in the imports of capital goods. Without increase in the investment in the manufacturing sector it is feared that the increase in exports would fail to boost development of the sector.
With good macro economic performance and growing domestic market, the country's economy has strong fundamentals to expand. Foreign investors have indicated strong interest in the country's economy as shown by the strong inflows of foreign capital to the financial market. However, the foreign capital in the financial market would not move further to the real sector if the infrastructures remain not sufficiently available to provide support.
If the deficiency in infrastructure could be sorted out Indonesia would be able to continue to take big steps in its economic development with the support of strong manufacturing sector. The country would not have to continue to rely on exports of primary commodities.