Indonesia again suffered a trade deficit in January 2019, partly due to the fall in world commodity prices. Industrialization should, therefore, be prioritized. The deficit occurred because non-oil and gas as well as oil and gas exports fell sharply, even though imports of oil and gas and non-oil and gas commodities reduced significantly, according to the last week’s report from Statistics Indonesia (BPS).
Coordinating Economic Minister Darmin Nasution said the government would impose a short-term policy to prioritize industrial commodity exports instead of raw commodity exports. In our experience, raw commodity exports do not guarantee sustainable and quality economic growth.
Raw commodity prices fluctuate constantly. A number of countries are trying to escape the commodities-dependence trap by processing raw material into semi-finished or finished products. Prices are more stable for processed products, which also have added value and create jobs.
Indonesia has been developing its industry since the 1970s. From the latter half of the ‘80s until the advent of the Asian financial crisis in 1997, Indonesia\'s economic growth was the focus of world attentions. In 1993, the World Bank report "The East Asia Miracle: Economic Growth and Public Policy" cited Indonesia as possessing strong and sustainable economic growth.
The source of growth in this period was our broad manufacturing industry. The 1997 financial crisis halted the pace of economic growth and industrialization. A number of experts say our industrialization is still developing, so that it is a great source of growth.
We are now facing a different situation compared to the end of the last century. It is no longer sufficient to develop all manufacturing sectors because we must compete with the same, more competitive products from other countries.
The industries we need to prioritize are those based on local materials and human resources, incorporating the use of technology. The development of primary upstream businesses will result in the establishment of thousands of downstream companies with high added value that can absorb a lot of labor.
Our advantages in the production of crude palm oil, for example, enable us to produce dozens of value-added downstream products. Coal can be processed into gas like dimethyl ether as clean energy. Similarly, nickel ore can be processed as the raw material for domestically produced stainless steel and premium batteries. We have a lot of agro-industry products and unprocessed mining products, but they are still exported as raw or semi-finished products for a variety of reasons.
Developing our processing industry will make our products more competitive in the world market because we have the raw materials. It could also be a source of more sustainable and quality growth.