Indonesia-Direction of Trade

In the early 1990s, Indonesia's trade partners included dozens of countries throughout the world. Imported goods came from markets as near as Singapore, one of the newly industrializing economies (NIEs) of Asia, and as far as Europe and the Middle East (see table 21, Appendix). Japan and the United States were the most important suppliers, together accounting for a 37 percent of imports in the late 1980s. The growth in Indonesia's manufactured products contributed to a growing diversity of export markets. However, the importance of oil and liquefied natural gas in total exports gave Japan, the major market for these natural resources, predominance among export destinations (see table 22, Appendix).

In 1990 more than 70 percent of exports to Japan were crude petroleum, petroleum products, and natural gas, which represented 67 percent of all petroleum exports and 75 percent of all natural gas exports from Indonesia. Although Japan was also an important market for agricultural and manufactured goods, the markets for these products were more diversified among Indonesia's many trade partners. Half of Indonesia's natural rubber and one-third of its clothing exports were exported to the United States. One-third of Indonesia's plywood products was exported to Japan, but significant shares also were exported to the United States, the Republic of Korea (South Korea), Taiwan, and several European nations.

The government participated in several initiatives to expand and diversify export markets. In 1991 the Department of Trade organized a mission to China, a country with which economic ties had been effectively severed from 1965 until the late 1980s. Recorded exports to China were 3.2 percent of Indonesia's total exports in 1990 (although this measure may not have indicated a genuine increase in trade as before 1990 Indonesian products were shipped to China via Singapore and Hong Kong). Compared with trade with other trade-partner nations, 3.2 percent ranked the China trade close to countries such as the Netherlands and the Federal Republic of Germany (West Germany) but ahead of all ASEAN partners except Singapore. Relations with China warmed after the trade mission and greater overall trade was anticipated.

ASEAN was founded in 1967 to promote economic integration among the nations of Indonesia, Singapore, Thailand, Malaysia, and the Philippines, and later Brunei. Early efforts of this group included an industrial projects agreement signed in 1976 to establish several large-scale industrial projects jointly owned by member governments, and the 1981 Industrial Complementation Scheme designed to coordinate the production of components for manufactured products, such as automobiles, among ASEAN members. In 1992 a major trade accord--the Common Effective Preferential Tariff--proclaimed that an ASEAN Free Trade Area (AFTA) was to be established in January 1993 and result in a gradual reduction in tariffs on manufactured goods to a maximum of 5 percent by 2008. The initial measures listed fifteen categories of manufactured goods, including plastics, fertilizer, wood pulp, glass products, electronics, and wooden furniture, that would have a uniform tariff of no more than 20 percent within eight years. The Asian Wall Street Journal reported in early 1992 that significant loopholes in the trade accord, such as permission for individual countries to exclude certain products from tariff cuts, could dilute its impact. In addition, Indonesian won a delay of fifteen years in implementation.

Data as of November 1992