Experts have suggested that the government diversify its export destination for non-oil and gas commodities in the wake of economic recession that currently hit Japan, Indonesia’s main non-oil and gas export destination.
According to Statistics Indonesia (BPS), the decline in Indonesian exports has begun to be felt since 2023. The agency recorded that the value of Indonesia’s non-oil and gas exports to Japan has dropped 18.59 percent cumulatively to US$18.9 billion in 2023.
The decline continued until early 2024. As of January 2024, the value of Indonesia’s non-oil and gas exports to Japan was only US$1.46 billion, down 22.73 percent compared to January 2023.
Indonesia’s main export commodities to Japan are mineral fuels which include coal, electrical machinery and equipment, jewelry, gems, nickel, wood and their derivative products, rubber and their derivative products, vehicles and their components.
“Our exports to Japan are among the highest. This means we have to diversify our export destination countries. Maybe the Middle East and Africa could be new export destinations,” Nailul Huda, an economist at the Center of Economics and Law Studies (CELIOS), said.
He also suggested that there needs to be efforts to strengthen consumption through increasing household purchasing power so that the recession experienced by large countries does not have an impact on Indonesian economy. Lastly, he suggested the importance of maintaining the inflation rate to protect the economy.
Yusuf Rendy, an economist from the Center of Reform on Economics (CORE) similarlly suggested that the government diversify its export destination countries to anticipate the impact of the recession.
He said that Indonesia’s exports to Japan were mostly textile products, footwear and wooden furniture. So, the potential decline in this sector needs to be anticipated by business actors.
“For business actors who make exports to Japan one of their main goals, I think it is necessary to carry out an evaluation and start thinking about which markets could be alternatives to Japan,” he said.
Yusuf also advised the government to consider countries dominated by productive age populations, like several countries in South Asia and North Africa which are considered prospective.
“Let’s take Pakistan and India as an example, they have growing markets that are relatively similar to Indonesia, so demand for various goods products will be more dynamic,” he said.
He cited that Pakistan is a Muslim country that could be a destination for exporting halal products, so that it can develop and encourage halal products to be exported. Apart from that, Egypt can also become another export destination country.
“For the same reason as Pakistan and these two countries, even though they are prospective, if we look at the share, they are still relatively small compared to the composition of Indonesia’s exports,” he said.
