Indonesia Has the Opportunity to Increase Exports to India for Coal, CPO, to Iron and Steel Commodities

Illustration of loading and unloading for export. (Photo: Doc. Antara)

JAKARTA - A researcher at the Center for Indonesian Policy Studies (CIPS), Hasran, assessed that Indonesia needs to see export opportunities to India. Especially when China, which is a major trading partner, is experiencing an economic slowdown.

According to Hasran, both China and India are Indonesia's main export destinations for mineral fuel commodities, such as coal, vegetable oils such as CPO and its derivatives, as well as iron and steel products.

"Based on experience, for these commodities, if exports to China slow down, market share can be shifted to India, and vice versa", he said in a statement quoted by Antara, Monday, December 12.

Hasran assesses that there are differences in the trend of Indonesia's non-oil and gas exports to the two countries. Indonesia's non-oil and gas exports to China always increase every year. Meanwhile, exports to India have decreased every year except for 2021.

However, according to him, several things have the potential to increase Indonesia's exports to India. First, India's rapid population growth rate is likely to increase industrialization as a labor-absorbing sector other than services.

"If industrialization grows massively in India, there will be an increase in demand for coal as an energy source. On the other hand, China will switch to renewable energy so that coal exports will decrease to China", he said.

Second, along with growth in the industrial sector, involvement in the global value chain (GVC) will also increase.

"This will increase Indonesia's opportunities to increase exports to India for industrial raw materials, such as iron, steel, aluminum ore, and also nickel", he added.

In addition, the increase in their domestic consumption will encourage an increase in the number of raw materials needed for the food and beverage industry.

In this case, Indonesia can increase exports of CPO or crude palm oil as the main raw material for the Indian food and beverage industry.

Hasran said that currently the Indian economy is strongly supported by the service sector, especially digital technology. A growing economy necessitates greater involvement in GVCs, especially in the high-tech manufacturing sector.

However, several Indonesian export commodities only excel in India, such as alcohol, phenol, phenol-alcohol, natural rubber, and fertilizers.

Meanwhile, Indonesia's export products that excel only in China include briquettes, lignite and peat and aluminum ore, cement, natural gas, and paper products.

Even so, Hasran said China would still be Indonesia's main trading partner, even though they were experiencing an economic slowdown.

"China's economic slowdown will only last in the short term. After the Chinese Government loosens the COVID-19 policy, the economy will recover", he said.

Hasran also assessed that trade between Indonesia and China would become more intense with the Regional Comprehensive Economic Partnership (RCEP).

This trading bloc allows its member countries, including Indonesia and China, to trade in goods, services, and investments with low tariffs and simple trade procedures.

"Diversification is a good step to minimize the impact of other countries' economic conditions on Indonesia", said Hasran.