Indonesian Exports Relies on Commodity, Has to Increase Processed Product

TheIndonesia.id - The Center for Indonesian Policy Studies (CIPS) research institute said that Indonesia needs to increase exports of processed products and not depend on exports of commodity products. The latter performance can be affected by fluctuations in world prices.

"About 45 percent of Indonesia's exports are commodity-based, whose prices fluctuate and are highly dependent on the dynamics happening around the world," said CIPS Senior Fellow Deasy Pane in a statement received in Jakarta, Monday, March 21, 2022.

Pane said Indonesia's exports were still dominated by commodity-based products whose prices rose sharply. She said the Russia-Ukraine conflict had a significant effect on commodity price movements which would affect Indonesia's trade value, although it did not directly affect Indonesia's trade volume.

"High commodity prices will affect Indonesia's export achievements. However, it does not reflect the quality and competitiveness of Indonesian products, and is only temporary," said Pane.

In the last two decades, the contribution of Indonesia's exports to the world has been stagnant at 0.9 percent. Meanwhile, only 18 percent of industrial business players are involved in export activities, which indicates that they are domestically oriented.

CIPS recommends the government encourages businessmen to dare to compete in the domestic and export markets, supported by efforts to increase productivity and quality according to international standards. This can be done through the government's commitment to creating a supportive investment climate, a healthy business competition climate, increasing workforce capacity, development and infrastructure.

In addition, support for innovation, research and development, and technology absorption needs to be increased. The lack of a research and development ecosystem can have an impact on the weak motivation of business actors to innovate and only take advantage of the large domestic market for profit.

According to Pane, research and development are needed to optimize product value or increase process efficiency, which is necessary to compete in the global market. "From the demand side, the government needs to ensure easy and low-cost access to the export market by reducing tariff and non-tariff barriers in the export market and providing complete and easily accessible market information," she said.