Indonesian Imports Dropping as Country Considers OPEC Return

Indonesia has reported a sixth consecutive monthly trade

 Indonesia has reported a sixth consecutive monthly trade surplus for May, as it is preparing to re-enter the OPEC cartel.
The 12 current members, which account for 40% of the world’s oil production, have now voiced their support for welcoming Indonesia back to the fold. This is after the country voluntarily left OPEC seven years ago after it became a net importer of crude oil due to production problems at home.
Authorities have for a number of years now banned the export of certain raw materials such as oil and iron ore, with companies only being granted export licences on the basis that they invest in processing facilities – such as smelters and refineries, in a bid to stop the flight of raw materials from the world’s fourth-most populated country
A statement from the Ministry of Energy and Mineral Resources read: “All the members of OPEC, including Saudi Arabia, stated their support to Indonesia to re-join OPEC, remembering that Indonesia is one of the country participating in founding and developing OPEC.”
It’s believed that the move could lead to large-scale investment in Indonesia’s oil infrastructure, with Saudi Aramco keen to invest in a refinery in the country. “Saudi Arabia is the biggest supplier of crude oil for Indonesia. Last year, Saudi Arabia supplied up to 40 million barrels, so due to [its] support and co-operation Saudi Arabia has a strategic role for Indonesia,” said Saudi Petroleum Minister Ali Al-Naimi.
The investment could allow Indonesia to feed the growing domestic demand for energy, as the government continues to seek ways to move up the economic value chain.
But producers have claimed that while the long-term goal is admirable, in the short term, it will lead to the collapse of many small companies, which have not got the capital to invest in the sort of machinery the government demands.
Some have urged the government to focus instead on corruption and organised crime in areas of Indonesia that are commodity rich.
The latest Indonesian trade data, paints a bleak picture of domestic demand in Indonesia – an indicator of poor economic growth in the run-up to Ramadan. The trade surplus of US$950mn was mainly built on declining imports. While Ramadan is a month of fasting, it is also the country’s busiest shopping period.
Exports dropped after demand for commodities in markets such as Japan and China fell significantly. Exports to Japan were down 20.8% on the previous year, while goods to China were down by 20.9%.
Total import volume was down 21.4% year on year, with oil imports down 44% – although a lot of this can be explained by the lower oil prices.
The country’s Trade Minister Rahmat Gobel says: “Despite export decreases to those countries, we recorded export growth in various non-oil and gas sectors that comprised of farming, that saw a 0.7 percent growth.”