The Iran-Israel Conflict Risks Disrupting Global Supply Chains and Indonesian Exports
The Iran-Israel conflict could break out again. This risks disrupting global supply chains and Indonesian exports.
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By
BENEDIKTUS KRISNA YOGATAMA
·3 minutes read
AFP/AHMAD GHARABLI
A boy riding a donkey passes near one of the Iron Dome missile defense system batteries in a village in the Negev desert, Israel, on Sunday (4/14/2024).
JAKARTA, KOMPAS — Business actors assess that the escalation of the Iran-Israel conflict risks disrupting the global supply chain. This will erode domestic business exports. Considering that global uncertainty is increasing, shifting focus to the domestic market is an alternative.
The Vice Chairman of Agrarian Affairs, Spatial Planning, and Industrial Area of the Indonesian Chamber of Commerce and Industry (Kadin), Sanny Iskandar, stated on Monday (15/4/2024) that Iran's air strike on Israel last weekend added to the long list of various global geopolitical tensions. After the Russia-Ukraine war and the Israel-Hamas conflict, now a conflict has erupted between Israel and Iran.
Sanny estimates that the escalation of the Iran-Israel conflict will disrupt global supply chains around the Middle East.
Various geopolitical tensions add to the element of global uncertainty. The escalation of the Iran-Israel conflict is predicted by Sanny to disrupt the global supply chain in the Middle East region. However, the region has a strategic position in trading goods and services.
Disrupted supply chains can increase the prices of goods and services. This is because there could be additional time and shipping costs. Not to mention if there are certain commodities that cannot be distributed properly due to security disturbances in the area.
“This supply chain disruption can create a shortage factor. "The availability of finished goods has decreased because distribution has been disrupted," said Sanny.
As a result, Sanny continued, the export of domestic industries could be eroded. The Middle East region is strategically positioned for the distribution of export goods to the European, Middle Eastern, and West Asian regions.
The domestic market is, right, big. There is a lot of potential that can be exploited.
Based on this risk, according to Sanny, business actors can anticipate it by shifting their focus to the domestic market. Although the purchasing power of the domestic community has not fully recovered, the domestic market offers lower uncertainty.
"The domestic market is huge. There is a lot of potential that can be utilized. This is good because domestic entrepreneurs do not need to rely too much on uncertain political and global trade situations," said Sanny.
The Head of Inter-Institutional Relations of the Indonesian Employers Association (Apindo), Sarman Simanjorang, stated that every geopolitical turmoil certainly has an impact on the economy not only globally, but also can spread to Indonesia.
Considering that Iran is one of the strategic oil producers in the world, all economic stakeholders must be wary of the potential possibility of oil price increases in the future.
The government, he continued, needs to closely consider the extent of the trade and investment relationship between Indonesia and Iran. By doing so, the impact of the escalation of conflict between the two countries on Indonesia's economy can be mitigated.
"Increasing geopolitical tensions need to be anticipated appropriately so that they do not disrupt the domestic economy," said Sarman.
Former Trade Minister for the 2004-2011 period, Mari Elka Pangestu, stated during a virtual discussion held by the Indonesian Eisenhower Fellowship Association on Monday (15/4/2024) that, in the short term, the Iran-Israel conflict will bring surprises to the supply chain disruption.
This situation will soon drive up commodity prices and create global inflation. The first commodity that will immediately experience a spike in price is world crude oil.
”There is asupply shock that will occur. "Demand that cannot be matched by supply will cause price increases," said Mari.
