Home Blog How Trade in Indonesia Benefits the Economy Indonesia | Product Registration How Trade in Indonesia Benefits the Economy InCorp Editorial Team 19 June 2024 6 minutes reading time Table of Contents Indonesia's trade surplus continues since 2020 Indonesia's top export destinations and commodities Future projections of Indonesia's trade balance Conclusion Global trade is a dynamic stage where countries play to their strengths and address their weaknesses, which holds for trade in Indonesia. Thanks to its valuable resources and strategic location, the government has achieved trade surpluses. However, these successes come with their own set of challenges that require careful consideration. This article will explore the obstacles facing Indonesia’s trade surplus challenges. We’ll examine how domestic policies, global trends, and ongoing economic growth interact in this context. Indonesia’s trade surplus continues since 2020 Indonesia’s trade balance showcased a surplus of USD 3.45 billion in June 2023. The achievement extends a trend that has remained unbroken for 38 consecutive months since April 2020. According to Statistics Indonesia (BPS), Indonesia’s exports from January to June 2023 reached USD 128.66 billion. However, it represents a decrease of 8.86% compared to the same period in 2022. Meanwhile, non-oil and gas exports amounted to USD 120.82 billion, showing a decline of 9.32%. Economic experts argue that this surplus is not due to a surge in business transactions. The decline in export and import performance is expected to align with the global trade slowdown resulting from weakened global demand. Read more: MSMEs Exports Are Expected to Push Indonesian Trade Forward Indonesia’s exports showed a declining trend In June 2023, Indonesia’s exports reached USD 20.61 billion, marking a decline of 5.08% compared to May 2023 (month on month/MoM) and a decrease of 21.18% from June 2022 (year on year/YoY). Both oil and non-oil exports experienced reductions, each by 3.64% (MoM) and 5.17% (MoM), respectively. Export performance weakened across all sectors in June 2023. The mining sector encountered the most significant decline at 15.30% (MoM), followed by the agricultural sector at 7.89% (MoM) and the processing industry sector at 2.24% (MoM). The decline in exports can be linked to the reduced prices of several crucial Indonesian commodities on the international market. These include a 6.78% decrease in coal prices, a 3.90% decrease in crude palm oil (CPO) costs, a 1.52% decrease in rubber prices, a 1.58% decrease in aluminum prices, and a 1.19% decrease in nickel prices. Despite the export slowdown in June 2023, some non-oil export products still experienced significant increases on a MoM basis. These include the following: Inorganic chemicals (HS 28), which rose by 61.58% Animal/vegetable fats and oils (HS 15), up by 43.68% Food industry residues/waste (HS 23), up by 41.90% Clothing and accessories (knitted) (HS 61), up 11.65% Iron and steel (HS 72), up 7.36%. Indonesia’s imports show a decreasing trend The value of Indonesia’s imports in June 2023 was recorded at USD 17.15 billion, marking a 19.40% decline compared to May 2023 (MoM). This decrease in import value is attributed to a weakening in oil and gas imports by 29.12% MoM and non-oil and gas imports by 17.73% MoM. The reduction in imports in June 2023 spans across all categories of goods. Consumer goods contributed the most to this decline, which decreased by 23.33% MoM, followed by raw materials/auxiliaries, down by 19.24% MoM, and capital goods, down by 17.97% MoM. The Minister of Trade, Zulkifli Hasan, stated that the decrease in imports of consumer goods is in line with the weakening Consumer Confidence Index (CCI) of June 2023, which decreased to 127.1 from the previous 128.3 in May 2023. During the first semester of 2023, Indonesia’s total imports reached USD 108.73 billion, experiencing a 6.42% decrease compared to the first semester of 2022, which was USD 116.18 billion YoY. Indonesia’s top export destinations and commodities [elementor-template id=”229205″] Indonesia’s exports mainly contribute to non-oil and gas shipments to China, the United States, and Japan. China has been Indonesia’s largest export destination for the last seven years. Indonesia predominantly exports significant commodities like mineral resources, metal ores, and steel to China. Trade between Indonesia and China reached USD 133.6 billion in 2022. The Ministry of Trade reported that Indonesian exports to China were valued at USD 65.9 billion during the same year. Luhut Binsar Pandjaitan, the Coordinating Minister for Maritime and Investment Affairs, highlighted that technology transfer is a significant factor in Indonesia’s collaboration with China. According to Minister Luhut, China is keen to share its technologies, specifically for the downstream nickel industry, contributing to USD 34 billion in export value in 2022. Moreover, from 2014 to 2022, Chinese investments in Indonesia amounted to USD 30.8 billion, encompassing 15,906 projects. This cumulative figure positioned China as the third-largest foreign investor in Indonesia during that period. What are Indonesia’s top exporting commodities? According to BPS data, the commodities with the most significant contribution to Indonesian non-oil and gas exports in June 2023 are as follows: Mineral fuels with a value of USD 3.4 billion Animal/vegetable fats and oils with a value of USD 2.7 billion Iron and steel with a value of USD 2.2 billion Precious metals and jewelry/gems with a value of USD 337.1 million Metal ores, slag, and ash totaling USD 423.5 million Nickel and its products with a value of USD 405.8 million Clothing and accessories (knitted) with a value of USD 346.6 million Food industry residues and waste with a value of USD 216.8 million Inorganic chemicals with a value of USD 162.4 million Ships, boats, and floating structures are valued at USD 8 million. Future projections of Indonesia’s trade balance Despite some economic pressures, Indonesia’s exports are projected to remain robust, and therefore, Indonesia’s trade balance will still potentially achieve surpluses in the future. Economic experts estimate that the trade balance will continue to achieve an average monthly surplus ranging from USD 2 billion to USD 3 billion shortly. However, this surplus is narrower than the previous year’s average of USD 4 billion to USD 6 billion. The forthcoming export and import performance will be driven by various commodity types, including mineral commodities that are beginning to show signs of recovery. Indonesia’s export performance will also be influenced by government efforts to promote the downstream of natural resources (SDA) and bare minerals, which are expected to yield positive outcomes for enhancing export value-added. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Newsletter Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Conclusion Despite the challenges, economic experts project that Indonesia’s export remains strong, influenced by government efforts to promote downstream natural resources (SDA) that can potentially result in positive outcomes for enhancing export value-added. Businesses considering maximizing the potential of Indonesia’s export performance can engage InCorp Indonesia to ensure regulatory compliance before exporting their products to the Southeast Asian region and beyond. Similarly, businesses that aim to penetrate their products into the Indonesian market can seek help from InCorp Indonesia for services related to product registration to obtain permission granted by specific governing bodies before entering the local market. Read Full Bio Daris Salam COO Indonesia at InCorp Indonesia With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.