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... ng (- 37. 45 %). Sectors showing the greatest expansion are non-oil / gas mining (21. 11 %), non-food crops (5. 96 %), electricity (5. 08 %), communications (4. 83 %) and fisheries (4. 08 %). It is disappointing that non-oil / gas manufacturing contracted more rapidly than overall GDP (- 14. 48 % vs. 13. 68 %). However, assuming that agriculture (including all sub-sectors), mining (not quarrying) and manufacturing constitute tradable's, whereas construction, utilities, quarrying and all services constitute non-tradable's, the balance of economic activity shifted towards tradable's in 1998 compared with 1997. The share of tradable's as defined above in GDP rose from 47. 15 % in 1997 to 51. 12 % in 1998.
This shift in relative size is consistent with a real depreciation, even though the depreciation was contraction ary. Data on employment is not recent enough to evaluate whether labor shifted into tradable's. It is known that there have been massive layoffs in many industries and services, with construction and banking being the hardest hit. However, it is not known with any precision to where the displaced labor has moved. That will be a topic for future research once data become available.
Isolating the impact of the depreciation of the rupiah on Indonesia's trade and trade-related economic performance is beyond the scope of this study. First of all, the time frame is not sufficient in duration to do a proper evaluation. Secondly, separation of the impact of one key variable in a situation where several important variables are operating interdependently is not a particularly useful exercise. Finally, virtually all the data being examined are preliminary or very preliminary. Hence, this is more of an exercise in attempting to identify any empirical regularities and to provide the basis for comparison with the other trade-oriented countries that have been hit hardest by the Asian crisis (i. e. , Thailand, Korea, and Malaysia).
Trade data relevant to an evaluation of the impact of the crisis is readily available. The close association between trade and investment and between these key variables and economic growth has been the focus of recent empirical studies. Frankel and Romer (1999, 394) conclude: Trade appears to raise income by spurring the accumulation of physical and human capital and by increasing output for given levels of capital. Hence, a decline in the amount of trade is expected to be associated with reduced accumulation and income per capita. An Overview of Indonesian Trade: Merchandise Exports and Imports Merchandise exports fell in value (current US$) in 1998 by 8. 6 % compared with 1997 on a calendar year basis.
The decline is caused by a combination of very weak petroleum and liquefied natural gas (LNG) prices in international markets coupled with a decline in export volume. It is estimated that the volume of oil & gas exports declined by 5 %, while unit prices fell by over 32 % in 1998 compared with 1997. The share of oil & gas in merchandise exports declined to just 16. 1 % in 1998 from 21. 8 % in 1997. The collapse of oil prices to a low of less than $ 10 per barrel in 1998 reflects a response to rising global supply (Iraq has been able to resume exports) and a contraction in demand in Asia. Members of the Organization of Petroleum Exporting Countries (OPEC) have exceeded their export quotas and non-members have also expanded supplies. We will concentrate the remaining discussion on non-oil / gas trade.
Non-Oil/Gas Export Performance in 1998 In a previous study (James 1998 a) the prospects for non-oil / gas exports in 1998 were seen as highly uncertain and the official target of 13 % growth was seen as overly optimistic. The expectation that exporters would have difficulty despite the massive depreciation of the rupiah was based on the following: 1. Although the rupiah depreciation would encourage an increase in the volume of non-oil / gas exports, export prices in dollars appeared to be weak. 2. Demand in major markets in Asia, particularly Japan, was declining with the deepening recession. 3.
Import compression, observed in the latter months of 1997 and early 1998, threatened exports that relied on imported raw materials, intermediates and capital goods. 4. Exporters of footwear and other manufactured products were having difficulty obtaining credit for working capital, imported components and export insurance. 5. Freight rates were being increased as shipping companies sought to make up for losses resulting from rising imbalances between outward and inward cargo shipments. The concerns were justified. The volume of trade throughput in Indonesia's main seaports and airports has fallen considerably in 1998 compared with 1997. In particular, the volume of international cargo being unloaded (corresponding to imports) has fallen precipitously at both seaports and airports.
In contrast the volume of cargo being loaded (corresponding to exports) has increased by over 20 % (Table 3). The imbalance between outward and inward movements of cargo created temporary shortages of containers. Although that problem was resolved, the arrival of half-full vessels has reduced shipping companies profits and has led them to increase freight charges. An over 20 % decline in the volume of domestic trade (which is only slightly less than international trade) has also occurred in 1998 as measured by the volume of domestic cargo throughput in major seaports and airports (BPS, March 1999).
Non-oil / gas exports declined in value in 1998 compared with 1997 by 2 % (Table 4). This decline represents the first setback to non-oil / gas exports since the advent of deregulation in 1986. In part, the decline reflects the poor performance in the minerals sector where export volume fell by 1. 5 % and the current dollar value of exports fell by 13 %. These data contrast with the relatively good production performance of non-oil / gas mining (Table 2). However, the decline in export volume (in tons) is accounted for almost entirely by the collapse of exports of granite. Other mineral product export volume, including copper ore and concentrates, nickel, coal, and bauxite increased in 1998 over 1997.
Hence, the reduction in the value of mineral exports is almost entirely due to reduced international prices. Agricultural exports rose by almost 12 % over 1997 in current dollar value. Export volume of agricultural commodities was up by over 64 %. Hence, although prices were weak in dollar terms, exports still rose in value. However, agricultural products account for less than 8 % of overall merchandise exports. The overall performance of manufactured exports certainly deteriorated in 1998 compared with 1997 alternative growth estimates of minus 4. 2 or plus 1. 1 percent are the extreme negative and positive values (Table 4) in current prices.
The problem of pinning down the true performance of Indonesian manufactured exports arises from the very large amount of exports in the SITC 9 or HS 98 (PEBT) category (see James 1998 b for an elaboration). The real value of merchandise exports (including oil & gas) declined by 2. 75 % in 1998 compared to 1997, largely the result of a reduced volume of petroleum and LNG exports (Table 5). The real value of non-oil / gas exports increased by 1. 58 % in 1998. Thus, it can be established that the negative growth of non-oil / gas exports (Table 4) in current prices is likely to be a result of the decline in the international prices of Indonesia's exports rather than a decline in the volume of export shipments.
A finer decomposition of real export performance is limited by the problem of the allocation of PEBT exports to certain sectors. An effort is made to overcome this problem below. However, even if one can allocated most PEBT exports to particular sectors, over $ 2, 337. 6 million in current dollar non-oil exports are in a residual others category in 1998 compared with $ 1, 866. 0 million in 1997. Hence, 17. 5 % of non-oil / gas exports cannot be allocated with any precision. This makes it difficult to evaluate growth or contraction in any particular non-oil / gas export category, either in nominal or in real terms.
Data on the pattern of non-oil / gas exports at the SITC 2 -digit level, with PEBT (SITC 92) items reported separately, is ranked by nominal dollar value in 1998 (Table 6). The same is done at the 3 -digit SITC level (Table 7). Indonesia's comparative advantage in non-oil / gas exports lies in goods the production of which makes intensive use of semi-skilled labor and natural resource inputs. This can be seen in the rankings of leading export commodities at the SITC 2 -digit or 3 -digit level.
Vegetable oil exports (SITC 42 or 422) were sharply reduced (ignoring PEBT) in 1998 compared with 1997. A cause of this drop was the imposition of a ban on exports of palm oil in December 1997 that lasted into 1998, but was eventually replaced with a variable levy on exports. This policy sought to reduce the inflation in cooking oil prices and was partially successful (Marks, Larson and Pomeroy 1998). Cooking oil is considered one of nine essential commodities by the government and accounts for about 4 % of the consumption expenditures of poor households (poorest quintile).
Unfortunately, because of a lack of recent information on production inputs into export commodities it is not possible to accurately classify the factor intensities. Using OECD classifications would be misleading. For example, for most electrical machinery produced in Indonesia, value-added is likely to be mainly in the form of labor inputs in simple assembly and packaging rather than in production of components. Hence, it would be misleading to classify these exports as human capital or technology intensive as is done in OECD countries. In addition there is the problem of allocating PEBT items. Hence, we confine our factor intensity analysis to the composition of imports.
Non-Oil/Gas Imports: Import Compression Accelerates The collapse of imports began in late 1997 and worsened in 1998, with the nominal dollar value of merchandise imports declining by over one-third (Table 8). Oil & gas imports in current dollars contracted by nearly as much as total imports in 1998. Manufactured imports, which had been about level in 1997, declined precipitously in 1998. Import compression in terms of volume declines in the amount of real imports was severe in 1998 (Table 9).
Imports of non / oil gas products are disaggregated and ranked by 1998 current dollar value at the SITC 2 -digit and 3 -digit levels (Tables 10 and 11). The factor intensity of non-oil / gas imports may be summarized from Table 7. In 1998, over 54 % of the imports covered in Table 10 are technology-intensive goods, 22 % are natural resource-intensive, 17 % are human-capital intensive and only 6 % are labor-intensive. The result of larger natural resource-intensive imports in 1998 is largely due to the drought-related problem that led to a huge increase in rice imports (wheat...
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