International trade issues and their impact on Indonesia's business relations

Indonesia and International Trade

Indonesia is an archipelago i.e. A group of islands that stretches along the equator between the Southeast Asian mainland and Papua New Guinea. The country controls important shipping lanes from the Indian Ocean to the Pacific Ocean. The strategic sea-lane location of the Indonesian archipelago has been an important facilitator of inter-island and international trade.

There are several aspects of international trade in Indonesia this include; the trade organizations Indonesia is part of. Indonesia has made efforts to promote its trade and international trade relations through membership of APEC, ASEAN, WTO and G-20 all this are international trade organizations that facilitate international trade between Indonesia and other countries in the world (Stanley St. Labs, 2010).

Another aspect is the commodity composition of international trade. The exports in Indonesia are mainly low technology goods and natural resource-based products. Indonesia has a number of industrial sectors that enable the country to take part in international trade this include the agriculture sector that is a great contributor to the country's GDP as well as employment sector. It boasts as one of the largest rubber producers in the world, its other major crops such as coffee, tea spice, palm oil. The country has exploitable timber lands and mainly exports timber.

The major export commodities are oil and gas where Indonesia is termed as the world's largest exporter of liquefied natural gas. Manufactured goods such as textile, clothing, footwear, cement and chemical fertilizers are an important part of Indonesia's international trade and textile is the largest export. These products are exported to Indonesia's three main export partners; Japan, the United States and Southeast Asia. The main import commodities in Indonesia are Machinery and equipment, chemicals, fuels and food stuffs. The import partners are; Southeast Asia, Japan and china. The main destination for Indonesia's products is Japan since it is the chief trading partner to Indonesia as well as the biggest foreign investor. They even signed an Economic Partnership Agreement (EPA) is a bilateral trade deal. This agreement exempts Japanese import duties at a great extent of 90% (Stanley St. Labs, 2010).

Indonesia can be termed as both open and not open to international trade to a certain degree when a comparison is made. Despite the rapid growth in exports of resource-based commodities, there is no significant progress that Indonesia has made in increasing its export on manufactured and processed goods. The producers in Indonesia are concerned on the ability of Indonesia to compete with low cost producers in foreign markets. The products in Indonesia are less competitive in the foreign markets due to the country's poor logistics system. Therefore international trade becomes closed in terms of the products since they would not be marketable in international trade markets. The products cannot find their way in international markets since they are termed as inferior and highly priced as compared to other similar products. There are also high costs of transporting high quality goods like shrimp from eastern Indonesia to where they are processed in java, this makes them too expensive to export and thus closes any chance for international trade exports of shrimps.

There are high intra-island logistics costs that include severe road congestion on java, in addition to poor road quality that makes trucking costs in Indonesia to be very high than the average for Asia and results to increased prices in general (The World Bank Group, 2011). There is also poor performance in main ports in Jakarta and Surabaya due to the low productivity in the port this reduces international connectivity and hence reduce the chances of Indonesia taking part in international trade as there is no way connections can be made internationally.

On the other hand Indonesia is increasingly becoming open to international trade through a number of efforts that are aimed to streamline and simplify trade related procedures. For instance the creation of a single window for trade NSW that is agreed with ASEAN that will replaces a manual system and hence make international trade easier since it is an online system and there would be no requirement of submitting paper copies of trade documents (The World Bank Group, 2011).