Foto: Ilustrasi, sumber foto: BI.go.id
Stramed, Domestic car sales have dropped 13 percent in the first six months of this year compared to the same period a year ago. Weak commodity prices have put the brakes on commercial car sales as continued political uncertainty surrounding April’s elections scared off retail and corporate consumers enough to delay purchases.
Manufacturers shipped only 481,577 cars to distributors in the first half, down from 553,733 vehicles a year ago, according to Astra International, Indonesia’s largest car distributor, quoting data from the Indonesian Automotive Industry Association (Gaikindo).
Sales of big item purchase like cars are often used to gauge the strength of Indonesian household consumptions, which account for half of the country’s economy.
“Some consumers delayed purchases because of the presidential election. We hope the market can rebound in July,” Fransiscus Soerjopranoto, the executive general manager of Toyota Astra Motor, said previously.
Toyota remained the best-selling brand in the domestic car market with sales of 155,139 cars, followed by Daihatsu (87,023), Mitsubishi (80,929), Honda (59,087), Suzuki (46,557) and Nissan (7,176). Astra, which handles the Toyota, Daihatsu, Isuzu and Peugeot brands, sold a total of 253,489 cars to reach a share of 53 percent of the market, up from 51 percent last year.
The data have made some manufacturers pessimistic that car sales can match last year’s 1.15 million units sold.
On the other hand, Indonesia’s car exports have been increasing. Exports of car and spare parts rose to $3.68 billion in the first half – 6.9 percent higher than $3.44 billion in the same period a year ago, data from the Central Statistics Agency showed. The growth owed mostly to exporting a wider variety of cars to more export destinations, Gaikindo chairman Yohannes Nangoi said.
Yohannes said he was confident car exports could grow by at least 10 percent this year.
He said local manufacturers are now capable of making 2 million cars every year – almost double the domestic market demand and leaving ample room for exports.
Meanwhile, the Indonesian Palm Oil Producers Association (Gapki) has said that crude palm oil (CPO) exports fell significantly in April, as destination countries had started introducing regulations that were prohibitive toward Indonesia’s main export commodity.
Gapki’s data shows that CPO exports in April fell 18 percent month-to-month (mtm), from 2.96 million tons in March. Meanwhile, 2.79 million tons of CPO was exported in May, a 14 percent increase from April’s figure.
Exports of CPO and derivative products (excluding oleochemical and biodiesel) fell to 2.01 million tons in April, a 27 percent mtm decline from 2.76 million tons in March. Exports of CPO and derivative products reached 2.40 million tons in May, an 18 percent mtm increase.
Gapki executive director Mukti said that several traditional markets for Indonesian palm oil, like India, had introduced regulations that did not favor the commodity, adding that Malaysia currently dominated the Indian palm oil market.
Malaysia, the second largest palm oil producer after Indonesia, was able to penetrate the Indian market because of its 2011 Comprehensive Economic Cooperation Agreement (CECA) with India, which offered reduced tariffs of 45 percent instead of 54 percent. The government to accelerate its negotiations for a trade agreement with India to improve the competitiveness of Indonesia’s CPO and palm oil products. Gapki also recorded a weakening trend in palm oil exports to China and Bangladesh.
Meanwhile, the European Union implemented the RED II policy in March, which weakened Indonesia’s palm oil exports to EU countries. The RED II is based on a determination that palm oil expansion has caused widespread deforestation.
Indonesia’s economy will be unable to grow at more than 5.5 percent in the short term if structural problems hampering productivity are not resolved, Finance Minister Sri Mulyani Indrawati said.
“Based on potential output related to production, it is estimated that our [economic] growth capacity is only in the range of 5.0 percent to 5.5 percent in the short term,” the minister told the House of Representatives.
At such rate of growth, Indonesia is at risk of falling into the middle-income trap. According to the World Bank, a country is in the middle-income trap if its gross national product per capita has remained between $1,000 and $12,000 at 2011 prices. Indonesia’s gross national product per capita is now $3,840.
Demographic experts and economists have warned that the country has about three decades left to benefit from a working-age population that is far greater than the number of children and the elderly. When the so-called demographic dividend expires in 2050, the country should have high productivity, comparable to a developed country, or the social cost of taking care of the economically inactive part of the population would burden the economy. To avoid the trap, “Indonesia’s economy needs to grow at above 6 percent per year,” the minister said. She said Indonesia must continue its structural reform policies to increase the country’s production capacity, especially in sectors that can accelerate investment inflows. These policies include simplifying regulations and documentary requirements, improving the investment climate, or providing investment facilities. Structural reform can also be carried out by increasing skills and capacity in the labor force.
Sri Mulyani said the structural reforms the government already carried out have had a positive impact so far. Annual growth in the Indonesian economy rose to 5.18 percent in the fourth quarter last year, amid global economic turmoil.
Obviously, Indonesia’s external debt, as of May-end 2019, increased 7.4 percent year-on-year (yoy), reaching US$386.1 billion, (or Rp5,521 trillion), based on the exchange rate assumption of Rp14,380 per US dollar. However, the growth in external debt in May 2019 was lesser than 8.8 percent yoy clocked in April 2019, Bank Indonesia (BI) stated while issuing the Indonesian external debt statistics for May 2019. The external debts comprised $189.3 billion of the government external debt and the central bank liabilities, and $196.9 billion of state-owned enterprises’ and private companies’ external debt.
Private companies’ external debts contributed to the increase in the country’s external debt growth, while the government’s external debt growth remained low, according to BI. The government’s external debt stood at $186.3 billion as of May 2019, or rising 3.9 percent as compared to 3.4 percent in April 2019 owing to the issuance of the government’s global bonds. Despite the rise, the value of the government’s external debt, in fact, dropped, compared to $186.7 billion in April 2019.
This development was influenced by net loan payment of $0.5 billion and the release of ownership of government securities (SBN) worth $1.5 billion by non-resident Indonesians. Reduced foreign ownership in SBN was influenced by uncertainty in the global financial markets that increased owing to the escalating trade tensions.
BI noted that the government’s external debt utilization was prioritized to finance development programs, with the largest section for productive sectors that can support economic growth and public welfare, such as the health service sector and social activities, with a share of 18.8 percent of the total government external debt; the construction sector, 16.4 percent; education, 15.8 percent; government administration, defense, and compulsory social security, 15.1 percent; and financial and insurance service sector, 14.3 percent.
However, the private sector’s external debt grew 11.3 percent yoy, lower than 14.7 percent in April 2019, owing to a decline in debt position in the financial services and insurance sectors (Red/many sources).