Indonesian Shrimp Threatened by Anti-Dumping Petition
Indonesia is often accused of anti-dumping or other violations of US trade law or FDA regulations. Some are legitimate, others are not. Currently, there is an active case involving aluminum extrusions, an ongoing FDA import alert on the herbal product kratom, and a new one involving shrimp. In October last year, the American Shrimp Processors Association filed a petition with the US Department of Commerce (USDOC) and the US International Trade Commission (USITC), accusing shrimp exporters from various countries, including Indonesia, of dumping. The association also accused the governments of those countries of providing subsidies to lower the costs for local producers to ship their goods abroad. Indonesia may take solace that earlier this year, the USDOC released a preliminary position stating that there is no evidence of the Indonesian government providing significant subsidies. “We will fight together to have [all the] accusations dropped. In the worst case, we hope to lower the dumping duty [imposed on Indonesian exports],” said Budi Sulistiyo, the ministry’s director general of fishery product competitiveness during a press briefing on Monday.
Indonesia’s Manufacturing Contracts Further
Indonesian manufacturing activity has contracted further on the back of diminishing sales, (tied to oversupply in major markets such as China) forcing some firms to shed jobs despite the sector’s overall upbeat outlook for the coming year. Remedies, such as FDI in manufacturing are an antidote but hard to come by. Published by S&P Global on Monday, Indonesia’s manufacturing purchasing managers’ index (PMI) dropped to 48.9 in August from a reading of 49.3 in July. This marks the second month in a row for the key gauge of factory activity to remain in negative territory, or below the 50-point threshold that separates expansion from contraction. The last time the headline index for Indonesia was in contraction territory was August 2021.
The report is based on a survey of purchasing executives from around 400 manufacturing companies across Indonesia. “The downturn in Indonesia’s manufacturing industry intensified during August, characterized by the steepest falls in both new orders and output for three years,” S&P Global Market Intelligence economist Paul Smith commented in the report. He went on to say that firms were responding to the deteriorating market environment by cutting their workforces, but “many” respondents “were keen to note these were temporary in nature”, reflecting confidence that conditions would improve. Bank Central Asia (BCA) chief economist David Sumual told The Jakarta Post on Monday that the reduction in the manufacturing workforce could worsen if the country failed to attract more investment to the sector. He said Indonesia needed “a lot of investment [in manufacturing] for workforce absorption” but it was losing to India and Vietnam, given that both of those countries are ahead in “productivity and efficiency”. Unlike Indonesia, India’s manufacturing PMI pointed to strong expansion in August at 57.5, while Vietnam recorded a good performance of 54.7 in July. David noted that an oversupplied market in China had forced Chinese manufacturers to slow down and therefore import less nickel and other industrial inputs from Indonesia.
Investor Sentiment Undeterred
Although Indonesia has been through some turbulent weeks that could have swung investor sentiment either way, market actors appeared largely nonchalant in a reflection of their confidence in the country’s political stability and solid economic fundamentals. That, at least, is the view of analysts at Bank Indonesia. And they may be correct. The first big event that could have shaken the market was the presentation of the government’s fiscal blueprint for 2025 on Aug. 16, one day ahead of Independence Day. The following Monday, President Joko “Jokowi” Widodo rearranged the cabinet, spurring speculation about his intentions just weeks before handing the baton to his successor, president-elect Prabowo Subianto. Mere days later, protests erupted nationwide over a controversial regional election ruling, with some rallies turning into chaos and some groups pushing for a week-long demonstration to ensure that their demands are met. Irrespective of the political nuances in the cabinet reshuffle and the thousands of demonstrators chanting “Revolution!” in front of the Senayan legislative complex, the market seemed undeterred. When all was said and done, the rupiah had strengthened by 1.27 percent from Rp 15,690 per United States dollar on Aug. 15 to Rp 15,490 on Tuesday, certainly helped by the greenback’s weakness as the dollar index — a matrix that measures the US currency against six foreign ones — went down by 2.2 percent over the same period. Analysts and Bank Indonesia (BI) officials say the rupiah’s movement today is largely dictated by what the dollar does and by global circumstances in general, rather than by recent domestic events. BI spokesperson Erwin Haryono told reporters on Friday that the market’s indifference to recent domestic events was “a good thing”, because it exhibited how investors were guided more by the archipelago’s economic foundation rather than political sentiment. “Foreign investors’ confidence in the Indonesian economy, with regard to both the real economy and portfolio [investment], is quite high,” said Erwin. (Jakarta Post)
Lower Drug Prices
President Joko “Jokowi” Widodo wants to reduce medicine prices in Indonesia to levels comparable to neighboring countries, according to Taruna Ikrar, the newly appointed head of the Food and Drug Monitoring Agency (BPOM). “The President instructed us to handle medicine prices to align at least with generic drug prices or those in neighboring countries like Malaysia, the Philippines or Singapore,” Taruna said on Tuesday, as quoted by news portal Detik.com, adding that the agency was to collaborate with the health and trade ministries to address the issue. He said the President had received a report showing that drug prices in Indonesia were up to 400 percent higher than prices abroad.
Free Meals and Green Economy: Jokowi/Prabowo Growth Plan
With predicted growth rates hovering at 5% for this year and next, President Joko “Jokowi” Widodo says the green economy and Prabowo Subianto’s flagship free meals program will prop up economic growth next year by fueling micro-level business activity and boosting exports. Delivering the annual August State Budget Address before lawmakers and regional representatives at the Senayan legislative complex, the outgoing president said the free meals program would not only “improve children’s nutrition” but also ramp up regional development by involving micro, small and medium enterprise (MSMEs). Aimed at feeding 82 million children, teachers and pregnant women, it is estimated Prabowo’s signature program will cost the government about Rp 450 trillion (US$28.66 billion) a year once it is fully implemented. The plan is to roll it out in stages. Jokowi said in his speech that the program was one of the short-term “strategies” to “accelerate economic growth”. The medium-term strategy, meanwhile, encompassed “strengthening downstream programs and the green transformation to increase export-oriented economic activities [that are characterized by] high value-addition and low emissions.” (Jakarta Post)