Govt expects Asian market to cushion commodity fall

Andi Haswidi, The Jakarta Post, Jakarta

The government said it expects export growth to remain robust this year as demand from major emerging markets in Asia should cushion the fall of commodity prices, despite the estimated slowdown in the U.S. economy.

Trade Minister Mari Elka Pangestu said Friday the country's export market was expected to grow by 14.5 percent by the end of 2008, in line with the government's economic expansion target of 6.8 percent.

The exports growth, Mari said, will be sustained by the same top commodities last year including copper, coal, nickel, crude palm oil, rubber, rubber products, cacao, paper and electronics.

"The growth of commodity prices will not be as high as last year, but nevertheless it will remain robust, thanks to the high demand from the Asian markets," she said.

Countries expected to show strong demand for such commodities, she said, included China, India, Australia, Brazil and countries in the Southeast Asian region including Malaysia, Thailand and the Philippines.

The International Monetary Fund (IMF) forecasted last month, that instead of the U.S., Japan and Western Europe being the main engines of world growth, this year they would be replaced by China, India and other emerging economies in Asia.

The IMF expects the emerging Asian economies to expand 8.3 percent this year.

The IMF lowered its forecast on the U.S. economy, saying it would expand by just 1.9 percent this year, due to the wide impact of its mortgage woes.

Signs of a slowdown was evident via the country's export growth to the U.S., from January until November last year, which dipped to 5.2 percent from a more than 11 percent growth posted in the same period a year earlier.

Japan, Western Europe and U.S. are Indonesia's top export destinations, with market shares respectively sitting at 14.6 percent, 14.4 percent and 12.3 percent.

Another forecast, this time from the World Bank, says despite the expected slow down, Indonesia's exports would remain resilient considering last year's performance.

Total exports reached US$103.07 billion from January to November last year, increasing by 13.04 percent, compared to the same period in 2006, largely due to the surge of commodity prices instead of an increase in volume.

"The overall exports growth of our non-oil and gas products ranged between 16 to 16.5 percent," she said.

Other products within that category such as paper and cardboards were marked with a higher growth.

"Other manufacturing products ranged from about five to 10 percent growth," she said.

Another reason to be upbeat on this year's export growth, Mari said, was due to the expected outcomes from the increase of investments in 2007, which should revamp exports on manufactured products.

The Investment Coordinating Board (BKPM) earlier reported that investment realization hit US$13.99 billion last year, rising by 169 percent from 2006 at $8.28 billion, with foreign investments contributing about $10.2 billion to the total.