Exporters to get helping hand to cope with demand slump

Indonesian exporters, especially labor-intensive ones, may get some much-needed support - in the form of relief on debt payments and capital expenditure subsidies - to help them cope with rapidly weakening global demand.

The Coordinating Ministry for the Economy will soon hold a three-way meeting with the central bank and representatives of export intensive companies, which are seriously affected by falling demand in exports due to the global crisis.

"The coordinating minister along with Bank Indonesia will summon all of the exporters whose businesses are severely affected by the crisis," a deputy to the Coordinating Minister for the Economy, Edy Putra, said on Wednesday.

The country is being hit by the global economic downturn, with exports nose-diving by 20 percent in December last year from a year earlier as overseas demand shrinks.

Despite this, Indonesia still managed to increase the value of full-year exports by around 20 percent in 2008 with US$136.76 billion of exports up on the $114.1 billion recorded in the previous year.

But the outlook for exports for 2009 is already bleak and seems to be getting much more gloomy with January non oil exports plummeting by around 46 percent.

Economists have predicted that the impacts of the global economic crisis would reach its peak in Indonesia by mid-2009.

"We are worried that the decline in exports would eventually affect the banking sector, that is why we also invited BI to attend. During the meeting, the government will try to find solutions for exporters' liquidity problems to avoid risks of defaulting on credits," Edy said.

"The assistance can be in the form of some relief for debt payments, training for dismissed employees, tariff protection measures and capital expenditure subsidies," Eddy said.

Full details on these measures are not yet formulated. he said.

The weakening rupiah rate against the US dollar also makes it more difficult for exporters to repay their export credits to the banks.

"We are now studying which sectors are suffering the worst impact from the global crisis.

"There are many factors such as declining demand for certain commodities or probably their buyers are collapsing as well. On the supply side, there could be a massive rise in production costs because of the weakening rupiah," Eddy said.

Edy suggested that sectors using dollars for their capital expenditure but earning their income in rupiah were the most severely affected while other sectors, such as the automotive sector, were only at the stage of `having a headache'.

"Some of these affected sectors include textiles, plastics, chemicals and steel. I think we can use the metaphor of being in `intensive care' for the steel sectors," he said.

Edy said that the government would not use some of the budget in the proposed stimulus plan to bail out the exporters.

"Stimulus is only a temporary solution. We want it to be sustainable," he said.

"Basically, there are three instruments that the government can use to solve these kind of issues. They are the fiscal, monetary and regulation instruments, for this we are utilizing our regulatory instruments."

The government set up Rp 71.3 trillion ($6.31 billion) for the stimulus package last month to stimulate the economy during the crisis. This is still subject to House of Representatives' approval.

The package was originally valued at only Rp 27.5 trillion.

The stimulus focuses on tax savings with a value of Rp 43 trillion, around Rp 13.3 trillion for waived taxes and import duties for businesses and certain households, as well as subsidies and government spending of Rp 15 trillion to help businesses. (hdt).

Source: http://old.thejakartapost.com/