Mr. Gumi takes a walk in a morning. He wears blue shirt, black shorts and running shoes, an old white shoes yet infrequently being used. He also carries drinking water. In that time, the weather is cool, it’s about 220 celsius, with green and colorful scenery, trees and flowers grow beside the road, continuously seemed in his eyes so he really enjoys the walking. Quite a few Mr. Gumi see other persons who doing the same activity. He always smile when see the other and the other always reply with smile, too.
The situation succors Mr. Gumi to
think clearly about economy condition in Indonesia. As a banker he has necessity to deal with it because it affects his customers both creditor and debtor. A week ago he visits some businessman and asking about his/her commerce. Most of businessman tells the same story, although few of them express the other. The red thread is strong: the year of 2015 would be hard for them to increase the commerce. Some of them also say last year sales level would be most realistic target in this year.
There are several motivations make the entrepreneur speak so. First, general election held in the mid of 2014. Indonesian celebrated democracy twice in that year. On April they voted for legislative members and on July they elected for president. Overall the election ran smoothly, albeit there were minor negative events. The election in one hand brought a positive signal about democracy but in the other hand brought adverse effect similarly. Uncertainty improved and most great businesses hold their transaction. They tended to wait politic stability. Most businessman would doing so because political risk could destructed his business. In effect a lot of business got slowdown and in turn the derivative industries would get punished likewise. Take beverage industry for example. Some of beverage companies stated that they didn’t expand significantly the business, indeed they always expanded every year. In sequence, plastic industry would affected too because some plastic companies supply its product to beverage industry.
Next, international demand still dropped. It is no doubt that US and Europe economies improved recently compared years in 2008 financial crisis and years after, however world bank suggest that the recovery still need longer time. In Asia, big economy like Japan still experiencing deflation. Moreover, China government is really careful in guarding his economy. China economy grew at level 7.4% in 2014, but the government projected the growth will be decline in 2015 at 7.1%, 7% in 2016 and 6.9% in 2017. The global economy is projected to grow 3 percent in 2015 after grew 2.6% last year. As we know that several Indonesia products were sold to advanced countries. We sell rubber product, textile, electronics, palm oil, forest product, automotive, cacao, coffee and fisheries product to these countries. The low demand would cause the linked industry could not grow optimally.
The third reason is commodity price lower. As we know that there are several commodity products exported to other countries. The lower price means lower sales (in value for Indonesia producer and exporter). World bank forecasts in 2015 several commodity indices prices will lower in 2015. Energy prices commodities would reduce to -40,5%, metals to -5,3%, grains -3.7%, fats and oil to -7.1% and raw materials to -6.0%.
Some businessmans also react negatively due to significant depreciation of Rupiah. This high volatility in short term lead to substantial cost. For example, on March 16, 2015 the closing price of USD/IDR lied on Rp. 13,237, indeed in January until June 2014 Rupiah lies in between Rp. 11.000 – Rp. 12.300. The depreciation soaring up material cost because some of the material are imported. Additionally, several materials like plastic material (PP, PE and other), steel (billet, slab and other), aluminium (ingot), petro chemical are traded in USD currency even traded in Indonesia region. It costing more and in turn could make rupiah weaker due to higher demand of USD.
Besides, businessman craft note too on electricity and regional standard wage. They claim both of elements weigh on their expense more and more in recent year. Labors in several regions demand of wage increase.
Last but not least, logistic cost in Indonesia is considered to relatively high. Based on a survey, logistic cost in Indonesia takes portion 27% of the total cost. The picture is really not good if it is compared to the neighbor country like Singapore, Malaysia even Thailand.
Mr. Gumi continues his walking until he finds home and take a rest. Everything become blur…….
Sigit Eko Yulianto 