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Metal Casting Technologies : September 2005
ASIAN OVERVIEW Indonesia is ranked 4th in the world in terms of population with more than 238 million people residing there in mid 2004. According to data obtained from World Bank Indicators, the national growth rate in Indonesia during 1997-2003 was 1.3 %, more than the world average of 1%. Indonesia is characterized among the lower middle- income countries of the world. Per capita income was USD810. The growth rate of GDP was 4.1% in 2003 and is predicted to be around 4.5% in the coming 2-3 years. Unemployment rate was estimated to be 8.7% in 2004. Indonesia's economic outlook looks promising in 2005. Economic growth accelerated to about 5.1% in 2004 and is expected accelerate further in 2005. The GDP per capita has reached pre-crisis levels. Growth is driven primarily by domestic consumption, which accounts for roughly three-fourths of Indonesia's gross domestic product. Problems that continue to put a drag on growth include low foreign investment levels, bureaucratic red tape, and widespread corruption. However, there is very strong optimism with the conclusion of peaceful elections during the year 2004 and the election of the reformist president Susilo Bambang Yudhoyono. Currently, the main export commodities include oil and gas, plywood, textiles and rubber. The countries to which most of Indonesian exports are destined are Japan 22.3%, US 12.1%, Singapore 8.9%, South Korea 7.1%, China 6.2% (2003). There has been a massive mayhem faced by Indonesia in past few years. It faced the Asian financial crisis during 1997, then the fall of President Suharto after 32 years in office, the first free elections since the 1960s, the loss of East Timor, independence demands from restive provinces, bloody inter-ethnic and religious conflict and a devastating tsunami disaster. Metal casting information for Indonesia is not readily available. However, in support of the 4th largest population in the world, the domestic casting industry appears to be fairly robust. The problem is more one of the non-existence of a casting industry infrastructure in the country. There appears to be a distinct lack of any cohesion in the industry. Throw in the instability of the country with regard to recent world events, and you have a very reluctant "rest of the world" when it comes to putting investment of time or money into developing the Indonesian casting market. From the stand point of regional interests developing casting sources in Indonesia, there is a lot of difficulty in language, getting around and simply being able to accomplish the bare necessities in a business development exercise. INDONESIA By Ken Foulke SOUTH EAST ASIAN SLOWDOWN The economies of five major Southeast Asian countries - Singapore, Thailand, Malaysia, Indonesia and the Philippines - are steadily slowing after a year of good performance. The pace of this trend, first visible in the fourth quarter of 2004, began quickening during the first quarter of 2005. Singapore's growth rate dropped from 6.5% in the fourth quarter of 2004 to 2.5% in the first quarter of 2005; Thailand's quarterly growth fell from 5.3% to 3.3% in the same period; Malaysia's industrial production in May 2005 contracted 0.4% year-on-year, the first such negative growth in three years. Indonesia's industrial output fell for two straight months in March and April 2005. In Singapore, industrial output has similarly dropped since March this year. Exports are slowing for all Southeast Asian countries with the exception of Indonesia. In 2004, Malaysia, Singapore and Thailand registered export growth rates of 21%, 24% and 23% respectively, but this year, they all fell to the 10% level. The Philippines' exports grew 9% last year, but they actually contracted in February and March this year. The Philippines' exports expanded at a slower pace of 8.8% in April 2005 and then dropped precipitously to 1.1% in May. Imports, however, were sharply rising in these countries, worsening their trade balance. Thailand and the Philippines were struck by trade deficits, and Thailand in particular showed its first current account deficit since the fourth quarter of 1997. The 2005 annualized growth rates for these countries are expected to be lower than originally forecast. The Singapore government expects GDP growth to hover between 2.5% and 4.5%, Malaysia has downgraded its growth target from 6% to 5.1%, and Thailand and the Philippines each place their growth at below 5% from 6.1%. The biggest reason for export slowdown in Southeast Asia comes from sluggish exports to China. China's import growth has dramatically fallen from 35.8% in 2004 to 13.9% in late May 2005. China's import demand has significantly decreased as global prices for raw materials have stabilized and its industrial structure has changed. In view of its high growth of 9.5% in the first half 2005 and similarly high growth in exports compared to last year, a new perspective is needed to analyse Southeast Asia's export slowdown to China. It now appears that the fall in exports of primary goods and processed materials accounted for Southeast Asia's export slowdown. In the manufactured goods sector, shipment of electronic parts was particularly sluggish. Southeast Asia regards deterioration in the export environment as part of the global economic cycle, and governments in the region do not particularly appear anxious to launch pump-priming measures to revitalize their economies. For example, Thailand has announced plans to invest a total of $43 billion for a variety of big-ticket projects over the next five years, but this is more a medium-to-long term measure than for immediate effect. Trying best to take advantage of economic conditions, the region seeks to conclude free trade agreements between ASEAN (Association of Southeast Asian Nations) and countries like China, Japan, Korea, and India. At the same time, ASEAN members are individually seeking FTAs (free trade agreements) with the US, Japan, Australia, and New Zealand. The region is seeking to increase exports to China through the China-ASEAN FTA that fully came into force in July 2005. There are plans to use this FTA as leverage for more FTAs with Japan and Korea. Southeast Asia is important for Korea from the point of industrial division of labour as well as a trading partner. Korea's exports to Southeast Asia have slowed recently but full implementation of the China-ASEAN FTA will deliver further blows. In order to compete better against Chinese goods, Korea must work harder to develop goods with added value, of high quality, and in greater variety. Korea should endeavour to move into less developed markets in Southeast Asia to tap into their market potential. Policy must be drawn up to expand investment and trade with the Indochina countries of Vietnam and Cambodia. For this purpose, Korea must be generous in offering its development experience as well as official development aid (ODA) to these countries. 42 www.metals.rala.com.au