Indonesia experiences export drop despite favoring condition

Despite the trend of the country's currency value declining against U.S. dollars, a condition that favors export increase, Indonesia is experiencing export drop in the last few months due to the slowing international export demand.

An official at Indonesian Palm Oil (Gapki) said in an earlier report that orders have declined as demand wanes from the European Union, India and China. Crude palm oil shipments stood at 1.6 million tons in September, down from 1.8 million tons in August. In the period to September from August, exports to India fell by 14 percent to 546,000 tons, exports to the European Union dropped by 19 percent to 481,000 tons, and exports to China slipped by 4 percent to 293,000 tons, Gapki Secretary General Fadhil Hasan said.

According to Fadhil, most importers would prefer a stable value of rupiah so that they can better plan their businesses, instead of instant weakening rupiah.

"We'd be happy if the central bank could maintain the rupiah in the 8,800 to 9,000 level," Fadhil said.

Similar demand also voiced by Indonesian rubber exporters association, saying that a maintained rupiah exchange value against U.S. dollar would benefit rubber farmers the most.

The rupiah hit its weakest level in the last 17 months, as foreign investors flocked to dollar assets on the euro zone's debt crisis concerns.

Indonesia saw rupiah being traded at 9,143 against U.S. dollars on Thursday last week, recorded as the weakest point since June last year.

The Rupiah exchange value against U.S. dollars had been as strong as 8,502 in August this year.

Indonesian central bank (BI) deputy governor Muliaman Hadad pledged mid last week that BI would keep its intervention in the market to reduce volatility.

An Indonesian economist said that the U.S. dollars would still be volatile in the next few months, until a correct solution to end crisis in Europe zone found by political leaders.

For Indonesia alone, Fauzi Ichsan an economist at Standard Chartered Bank Indonesia estimated that the rupiah exchange value against U.S. dollars would range between 8,400 to 8,500 per U.S. dollar by the end of next year.

"Indonesia would possibly getting its investment grade in the middle of next year," Fauzi said.

He estimated that within the next six to nine months, Asian currencies would rise again as investors would return to the region.

Source: Xinhua News