Manufacturing PMI Level Soars Higher Than Malaysia, Coordinating Minister Airlangga Calls This An Indication Of Continuing Economic Recovery

JAKARTA - The trade balance performance in September 2021 recorded a surplus of 4.37 billion US dollars, as released in the Central Statistics Agency (BPS) report on Friday, October 15. Thus, the surplus trend since May 2020 has been maintained or has experienced a surplus for 17 consecutive months.

The impressive surplus performance was supported by an increase in Indonesia's exports which were maintained in September 2021 by reaching 20.60 billion US dollars, a double digit increase of 47.64% (yoy).

"This achievement indicates that Indonesia's economic recovery continues, which is also reflected in the level of Purchasing Managers Index (PMI) of Indonesia's manufacturing sector, which is back in the expansion zone, namely 52.2 in September 2021, up from the previous month's level of 43.7," he said. Coordinating Minister for the Economy Airlangga Hartarto was quoted from the ekon.go.id page, Saturday, October 16.

Indonesia's PMI level in September 2021 is even better than several ASEAN countries, such as the Philippines (50.9), Thailand (48.9), Malaysia (48.1), Myanmar (41.1), and Vietnam (40, 2).

The easing of restrictions on community mobility in several regions in Indonesia amid a steady decline in cases was able to encourage the manufacturing sector to return to growth.

The maintained trade surplus was mainly due to the performance of Indonesia's mainstay export commodities, which continued to increase amid the upward trend in prices, particularly coal at 254.44% (yoy) and CPO at 63.90% (mtm).

"In addition to being caused by market mechanisms, the government's policy strategy during the pandemic in maintaining the export supply of the two commodities and ensuring the availability of domestic supplies is the key to maintaining export momentum amid rising prices," said Coordinating Minister Airlangga.

As is known, Indonesia is the second largest exporter of coal in the world and the first largest exporter of palm oil in the world. Indonesia's important role in these two commodities will certainly determine world supply.

In the midst of high demand, the Government succeeded in formulating an optimal export supply management policy strategy while maintaining domestic stock stability through the determination of a Domestic Market Obligation (DMO) for coal producers at 25%.

This policy has a positive impact in maintaining the momentum of the upward trend in global commodity prices. On the other hand, DMO is also indicated to be able to encourage the development of downstream coal products through the availability of domestic raw materials for the development of gasification, liquification, briquette, and various other product developments.

In the case of palm oil, the Government's policy strategy through setting progressive tariffs on export levies (PE) for palm oil is also indicated as a key factor in world supply management and maintaining the upward trend in commodity prices.

On the other hand, the progressive PE scheme is able to encourage the export of palm oil derivative commodities (CPO derivatives) which have more added value by ensuring the availability of domestic crude palm oil stocks. Thus, domestic downstream producers gain an advantage due to the relatively cheaper price of raw materials compared to producers from abroad.

In addition to specific strategies for these two commodities, the Government also plays an active role in encouraging Indonesia's export performance through several policies, namely (i) fiscal and non-fiscal incentives, (ii) facilities for providing exhibition spaces, design development activities, and services for business actors, ( iii) technical guidance to business actors and exporters, (iv) market opportunity information, (v) financing, export guarantee and insurance, (v) promotion and marketing.

"The government's commitment to encouraging exports will continue to be improved through the optimization of various policies and especially in encouraging the export of commodities with greater added value," concluded Coordinating Minister Airlangga.