Thread by @Trinhnomics

Indonesia exports (peaked in 2011 & declined since) by categories & item (yr 2019):

#1 Commodities 54% of total
#1 Coal (13% of total)
#2 Palm oil (12% of total)

https://twitter.com/Trinhnomics/status/1323511434408390656

#1 Coal is going out of fashion fast as countries phase out this cheap but polluting source of energy.

#2 Palm oil got pretty bad press due to deforestation & environmental issues.

So both #1 & #2 export items by Indonesia got issues in terms of growth & sustainability.

So?

Indonesia needs to CHANGE. As a country of 273 million people that'll grow to 331 by 2050 or 21% growth rate, it can't have its #1 & #2 export items to be COAL & PALM OIL.

That's natural resource competitiveness that's going out of style & not to mention unsustainable.

People

People is where Indonesia needs to go. Why do these environmentalists ARGUE AGAINST REFORMS TO MOVE TO LABOR-INTENSIVE MANUFACTURING v EXTRACTION? Coal is a known story. Let's talk about palm oil. #2 export item for Indonesia & #1 producer in the world & used in everything!

Why is palm oil so preferred & demand so high? Well, yield is best amongst the veggie oil.

Very versatile & semi-solid at room temp + resistance to oxidation (longer shelf-life), good for fried food (crunch), odorless (good for food).

50% of goods in markets have this. Yes!

Anyway, so we know why people produce this stuff (yield is good) & demand is high but frankly if u live in Asia then u know it's pretty horrible in terms of the annual haze & burning & environmental issues.

Indonesia produces 56% global palm oil supply & Malaysia is 28%.

Palm oil is CONTROVERSIAL for this reason. It's kind of like plastic - light, durable & cheap but frankly man a nightmare for the environment.

Palm oil is #2 for Indonesia & so it's KEY for the Indonesian economy. Employs 4.2 million people & 12 million jobs indirectly.

When u ask Indonesians why they slash & burn & turn to palm oil, then they say this: AN ECONOMIC OPPORTUNITY NOT PRESENTED IN OTHER SECTORS.

Yes, palm oil is also labor-intensive (need land too of course) & so people it BECAUSE THEY HAVE NOTHING ELSE BETTER TO DO.

Jobs needed.

But if #1 export is coal & #2 is palm oil, u got a problem here. Indonesia needs to expand the economic pie & diversify its export structure.

Why?

1st, it's not like coal & palm oil are fueling export growth. Gross exports PEAKED in 2011.
2nd, people turning against palm oil

The EU is clamping down on palm oil: The European Commission decided to completely phase out imports of palm oil for transport fuels by 2030, citing widespread deforestation.

India imposed higher tariffs of 17% (#1 customer).

So?

asia.nikkei.com/Spotlight/Asia…

Jokowi to his minister that to offset declining demand of palm oil, he wants to raise palm oil to 30% vs 20% of all diesel sold in Indonesia.

That's not the real solution. Key here is that Indonesia shouldn't rely on palm oil but rather its other comparative advantage - labor.

Specifically, labor-intensive manufacturing so that when Indonesians want to better themselves, their only options aren't palm oil but more lucrative jobs in manufacturing.

To do that, Indonesia needs to reform its investment & labor & business environment. Hence Omnibus Bill🤗.

Rant ends & read my other rant (& op ed & report) on why Indonesia reform is a BIG DEAL & why it HAS TO CHANGE.

You cannot have ur #1 & #2 be coal & palm oil & grow in a world that wants to be more environmentally sustainable.

Sincerely,

@Trinhnomics