Senin, 25 Februari 2013

Distorted trade statistics


Distorted trade statistics
Patricia Silalahi A Diplomat currently posted to
the Foreign Ministry’s Africa Directorate
JAKARTA POST, 17 Februari 2013


On Saturday, Feb. 2, The Jakarta Post reported that according to the latest data issued by the Central Statistics Agency (BPS), Indonesia suffered its first-ever annual trade deficit in 2012 of US$1.65 billion. 

A drop in Indonesian exports to 6.61 percent was attributed to declining demand from the nation’s major trading partners due to the global economic slowdown. At the same time, Indonesia recorded an increase in imports of 8.2 percent.

Trade Minister Gita Wirjawan expressed his concern and issued a warning that Indonesia’s exports for 2013 might remain stagnant, considering continued reduced demand from the nation’s major trading partners, such as the US, Japan and Europe. However, there is no strong ground for feeling anxious over this situation.

According to popular knowledge, the trade performance of a country is based on the total value of exports minus imports. In a shrinking world where interdependence between economies continues to grow, those who favor exports and think of imports as measure of success or failure for a nation’s economic performance disregard what is called production sharing networks.

Nowadays, most goods are no longer produced by one specific nation. Remember the classic dispute of Toshiba in the US legal system in the 1980s, when representatives of the well-known brand successfully argued that it was entitled for consideration as an American-made product. Take also the case of McDonalds in Indonesia, when a group of infamous people campaigned for a boycott of the fast-food restaurant because of its background as an American brand, only to later learn that the chain restaurants in Indonesia were fully owned by Indonesians. 

Therefore, international trade requires a new way of examining the links between trade, production, investment and the role of services as well as the role of government to guide national trade policy and an international body to serve as dispute settlement mechanism among countries.

Scholars who express anxiety over Indonesia’s latest trade statistics should review the data made available from the BPS. Indonesia’s trade deficit in 2012 was caused by an 8.2 percent increase in imports, driven by imports of intermediary goods for local production (73.1 percent), followed by capital goods (19.9 percent) and consumer goods (7 percent). Thus, in order to be correct, this figure for a $1.65 billion deficit needs to be deducted from goods purchased inside the country.

Trade statistics are based on the unit value of goods and therefore, exclude the factor of production sharing, where exporters import the parts and components needed for production. Production sharing implies a dependency on exporters to import components in order to do business. Eventually, a distortion of the nation’s trade statistics occurred. 

In a shrinking world of interdependent economies, international trade requires a new paradigm, and, as a response, the country’s trade statistics needs to renew its approach for data recording, where, unlike before, the per-unit value of goods has become less important. 

Deputy Trade Minister Bayu Krisnamurthi, as reported by The Jakarta Post on Feb. 5, attributed the increase in exports for processed products in 2012 to the government’s successful policy in limiting the export of raw materials. He highlighted that a Trade Ministry regulation restricting the export of raw rattan issued in 2011 boosted exports of rattan furniture to 26 percent in 2012.

This approach, aiming for 100-percent made-in Indonesia, does not suit the capability of small or minor companies and hampers people’s interests as entrepreneurs, as the case in Palangkaraya, Central Kalimantan.

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