Indonesia is a country working with an open economy.
Therefore, it conducts international trade through routine exports and imports of commodities to meet the needs of the people and support the domestic economy.
The Central Statistics Agency (BPS) defines imports as the entry of goods and services purchased by residents of a country from residents of other countries resulting in an outflow of foreign currency from the country. On the other hand, exports are shipments of goods and services sold by residents of a country to residents of others to obtain foreign currency from the buyer’s country.
Adrian Sutedi, in his book “Import-Export Law”, stated that export and import transactions are important economic activities. He wrote the following purposeful benefits of exports:
- Increase company profits through market expansion and obtain better selling prices (profit optimisation)
- Opening new markets abroad as an expansion of the domestic market
- Utilising excess installed capacity
- Export transactions of goods and services bring in foreign exchange for the country. The foreign exchange itself is a financial asset and liability that can be used in international transactions in the form of foreign exchange, gold, securities, foreign notes, etc
- Increasing domestic industrial growth
- Growing domestic industries
As for imports, according to various sources, countries tend to:
- Meet domestic needs in the form of raw materials, capital goods, and consumer goods
- Acquire modern technology
- Prevent price increases triggered by shortages of goods
- Reduce foreign exchange
- An increase in imports of raw or auxiliary materials and capital goods indicates that there is demand from the domestic industry; in consumer demand and has a positive impact on labour absorption
Imports of raw materials and capital goods indicate that the country’s economy is moving. Indonesia’s import value was recorded at US$18.61 billion in May 2022, down 5.81 percent month-on-month compared to April 2022, when imports were valued at US$19.75 billion.
The declining value of imports monthly was driven by a 12.07 percent drop in oil and gas imports to US$3.35 billion. Non-oil and gas imports also fell 4.31 percent to US$15.25 billion.
Oil and Gas
Crude oil, oil products, and gas are imported to Indonesia. Global crude oil prices in May 2022 were recorded at US$109.6 per barrel. Monthly, it’s up 6.92 percent and annually up 67.35 percent, year-on-year.
Deputy for Distribution Statistics and Services Setianto said on 15th June 2022 that the decline in Indonesia’s import performance throughout May was contributed by both non-oil and gas as well as oil and gas imports reducing. This period reached US$3.35 billion, as reported by Bisnis.com.
Non-oil and Gas
- Machinery and mechanical equipment
Non-oil and gas imports are dominated by machinery and mechanical equipment — for example, precision machinery and automotive — used to support the domestic industry. Setianto added that the value of non-oil and gas imports in May 2022 was US$15.26 billion, while in January, machinery and mechanical equipment was recorded as the largest portion of imported goods valuing US$5.55 billion, contributing 30.46 percent of total national imports. The Central Statistics Agency noted that Indonesia imports from China, Japan, South Korea, Thailand, Taiwan, Malaysia, Singapore, USA, Germany, Italy, Australia, and more.
2. Electrical equipment
Indonesia also imports electrical equipment and parts thereof. In May 2022, the lack of value of imported electrical goods contributed to the decline in non-oil and gas imports which stood at 11.16 percent.
Imports of food commodities include garlic, shallots, sugar, beef, buffalo meat, soybeans, salt, milk, and more. Indonesia’s imports according to the use of goods had decreased monthly, said Setianto. Consumer goods decreased by 10.77 percent, driven by fruit and vegetable commodities. However, the largest increase in commodity imports was sugar and confectionery (HS 17) which increased by US$106.8 or an increase of 18.22 percent as more goods came from Thailand, Brazil, and Egypt.
4. Plastics and plastic goods
Other Indonesian imported commodities are plastic and goods made of plastic used for packaging in the food and beverage industry as well as raw materials used for the automotive industry.
Cereals or grains are a group of plants grown for their seeds or grains to be harvested as a source of carbohydrates and starch. Cereal commodities that are still imported include wheat, corn, sorghum, and so on. Indonesia imports these cereal commodities from Australia, Canada, Argentina, the US, Brazil, and Ukraine, to name a few. Wheat imports are used as raw material for bread and instant noodles, which are popular among Indonesians, while corn is used for animal feed and consumption.
6. Organic chemicals
According to the Industry Ministry, imports of organic chemicals include those sourced from oil, sourced from agricultural products, organic chemicals for dye raw materials, organic chemicals that produce chemicals, and so on.
7. Pharmaceutical products
At least 90 percent of the raw materials for Indonesian medicines still come from imports. Indonesia remains reliant on supplies from China, India, and others, although the government has begun to map out efforts to reduce imports of pharmaceutical raw materials and encourage domestic production amidst the COVID-19 pandemic.
“The commodities that experienced a decline in May 2022 were cereal commodities (HS 10) minus US$62.5 million, machinery and mechanical equipment and parts thereof (HS 84) which decreased by US$65.2 million, pulp and food industry waste (HS 23) US$103.5 million, and iron and steel (HS 72) down US$254.4 million,” explained Muzhar.
Records from the Central Statistics Agency (BPS) indicate that the value of Indonesia’s exports in April 2022 reached the highest in history, at U$27.33 billion. “The previous record was set in March 2022, which was US$26.5 billion,” said Central Statistics Agency Head Margo Yuwono as quoted by Antara on Tuesday 17th May.
Yuwono explained that the value of Indonesia’s exports during April 2022 rose 3.11 percent. The largest increase in non-oil and gas exports occurred in mineral fuel commodities, which amounted to US$642.8 million (13.88 percent), while the largest decrease occurred in goods made of metals and jewellery or gems, which amounted to US$525 million (47.84 percent).
The export value in May 2022, however, reached US$21.5 billion. This figure is higher than Indonesia’s imports during the period, thus Indonesia recorded a trade balance surplus of US$2.89 billion – a fall off from the April 2022 surplus of US$7.56 billion.
Every month, this value decreased 21.29 percent compared to April 2022’s export value of US$27, 32 billion caused by diminishing non-oil and gas exports by 22.71 percent month on month or US$20 billion. Meanwhile, oil and gas exports rose 4.38 percent month on month, or US$1.49 billion.
Based on data from the Industry Ministry, until the end of May 2022, as reported by Kumparan, exports of the pharmaceutical industry, chemical drug products, and traditional medicines reached US$62.32 million. The pharmaceutical, chemical, and traditional medicine industries are considered to have great potential for development, given the large domestic market in Indonesia, as well as for increasing exports of pharmaceutical products. The pharmaceutical industry is included as one of the priority industries set out in the 2015-2035 National Industrial Development Master Plan (RIPIN).
Export-import value increases in 2022
Indonesia’s export-import value had decreased on a monthly basis, nevertheless, annually it had increased. In comparison between May 2021 and 2022, the value of exports in this year rose 27 percent year on year. Cumulatively, Indonesia’s exports during the January-May 2022 period reached US$114.97 billion, or 36.34 percent compared to the previous year, in 2021 at US$84.32 billion.
The value of non-oil and gas imports in May 2022 also increased annually by 25.33 percent over the year. The January-May 2022 period reached US$95.17 billion, rising by 28.93 percent year on year compared to the same period last year of US$73.82 billion. Half of 2022 is left – where shall the monthly and annual export-import value lead to?