Indonesia's recovery: Exports and regaining competitiveness

The paper looks at Indonesia's export competitiveness and the role of expor ts in economic recovery and sustaining growth. As with the other East Asian economies, Indonesia experienced an unprecedented decline in export growth prior to the financial crisis of 1997. Cyclical factors, especially a decl ine in prices and contraction of demand, are found to be the main factors u nderlying this trend. However, structural factors, such as increased compet ition from lower cost producers, low productivity, and low value added, als o contributed to the problems. in order to increase exports and maintain co mpetitiveness, in the short run it will be important to ensure macroeconomi c stability, maintain real wage increases in line with productivity, overco me bottlenecks with trade financing, and utilize foreign direct investment and international networks. in the medium run it will be necessary to deepe n the industrial structure by improving technological capability and deepen and broaden the human capital base.