New fuel prices threaten textile industry<\/p>\n
JAKARTA (JP): The government's decision to raise fuel prices
\nbeginning Sunday could trigger a mass shut down of textile firms
\nas the rise in production costs resulting from the fuel hike
\ncould further jeopardize their operations, the Indonesian Textile
\nAssociation (API) said on Friday.<\/p>\n
API chairman Lili Asdjudiredja said that many textile firms,
\nwhich were already on the brink of collapsing following the
\ngovernment's move last year to raise electricity prices and
\nworkers' wages, would face more financial problems with the new
\nfuel price increases.<\/p>\n
\"This (fuel price hike) could sound the death knell for many
\ntextile firms,\" Lili told The Jakarta Post.<\/p>\n
He said the latest decision to raise fuel prices, effective as
\nof April 1, would result in a production cost increase of only 7
\npercent for textile companies.<\/p>\n
But as fuel prices surge, prices of raw materials would also
\nsoar, sending overall production costs up by between 15 percent
\nand 20 percent, he went on.<\/p>\n
Local synthetic fiber producers already plan to raise the
\nprice of their products by between 5 percent and 13 percent, in
\nline with the new fuel prices.<\/p>\n
\"We'll be seeing many textile firms starting to collapse in
\nJune and July,\" Lili estimated.<\/p>\n
He said that textile firms, both big and small, serving only
\nthe domestic market were the most vulnerable.<\/p>\n
Earlier this month, the government decided to cut its fuel
\nsubsidy for industry by setting prices at 50 percent of the
\ninternational market prices. Based on current international
\nprices, the new price for diesel will be about Rp 1,000 per liter
\nor an increase of 60 percent from the current price of Rp 600 per
\nliter.<\/p>\n
Foreign investors in the mining and petroleum sectors, as well
\nas foreign-flagged ships are required to pay full market prices
\nas of April 1.<\/p>\n
The decision is aimed at saving the government some Rp 4.3
\ntrillion (about US$413 million) in fuel-subsidy spending this
\nyear.<\/p>\n
But Lili argued that the move might backfire on the
\ngovernment.<\/p>\n
He said the fuel price hike would lower Indonesia's
\ncompetitiveness in the global textile market.<\/p>\n
He also warned that the textile industry may not be able to
\nmeet its export target this year of $7.8 billion.<\/p>\n
\"We estimate exports this year will come in at between 20
\npercent and 30 percent below our target,\" he explained.<\/p>\n
He said the textile industry could tolerate pricing and
\ntaxation policies better, were it not for rampant corruption
\namong government officials.<\/p>\n
According to him, the textile industry has to pay 29 different
\ntypes of bribe to government officials and that these account for
\nsome 22 percent of the sector's production costs.<\/p>\n
\"With regional autonomy having come into effect, this practice
\nmay even spread to the regions,\" he added.<\/p>\n
Separately, Hadi Budoyo, a director of the fishing concern PT
\nDaya Guna Samudra, also expressed concern over the fuel price
\nhike.<\/p>\n
\"Fuel is a very sensitive issue to the fishing industry,\" he
\nexplained.<\/p>\n
He said that for the fishing industry, the cost of purchasing
\nfuel could amount to 40 percent of the industry's total costs.<\/p>\n
Hadi said his company would cut back on the operation of some
\nof its fishing fleet to use fuel more efficiently.<\/p>\n
\"Because we have to be more efficient in our operation, we may
\nnot be able to meet some of our fishing targets,\" he added.<\/p>\n
However, Hadi was unable to tell how the hike in fuel prices
\nwould effect his company's sales revenue.<\/p>\n
He added that it would become more difficult to estimate
\nproduction costs as fuel prices would now fluctuate in line with
\nmarket prices.<\/p>\n
\"We don't know how Pertamina is setting the fuel prices, so we
\nwill have to watch price movements in the market,\" he said
\nreferring to the state oil and gas company which holds a monopoly
\nover the sale of fuel.<\/p>\n
Late Friday, House of Representative Speaker Akbar Tandjung
\nurged the government to delay the April fuel price increase.<\/p>\n
\"The House wants the government to act more wisely in raising
\nfuel prices, and to hold intensive campaigns on the price
\nincrease first,\" Akbar was quoted as saying by Antara.<\/p>\n
The government already postponed fuel price hikes for the
\npublic twice since last year, taking into account the yet harsh
\neconomic conditions.<\/p>\n
The secretary general of the Ministry of Mines and Energy,
\nDjoko Darmono, said the government had already discussed the fuel
\nprice increase with industry representatives.<\/p>\n
So far, he said, the government had received no complaints on
\nthe issue.<\/p>\n
\"We will go ahead with the price increase on April 1,\" Djoko
\nsaid.<\/p>\n
A presidential decree providing for the hike was to be signed
\nby President Abdurrahman Wahid on Friday, he said.<\/p>\n
Djoko said that industry consumed about 23 percent of the
\ncountry's total fuel consumption, which was around 51 million
\nkiloliters last year. (bkm)<\/p>",
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