APGI to sue Ministry for quota manipulation

Abdul Khalik, The Jakarta Post, Jakarta

he Indonesian Textile Businesspeople's Association (APGI) plans to file a lawsuit against the Ministry of Industry and Trade and its key officials for allegedly manipulating the textile quota system.

APGI chairman Natsir Mansyur revealed on Saturday that he had collected data and evidence proving the ministry's top officials had misused their positions in assigning textile quotas, which had caused the industry a great loss.

"We have sufficient data to take the case to court. We will submit the report after the legislative election, sometime next week. However, we are still considering the right charges," Natsir told The Jakarta Post.

He added that the ministry and its officials had abused their authority for years, by assigning textile quotas to companies based on personal preferences, rather than the companies' capabilities.

The ministry even allocate quotas to individuals who have fictitious companies or no capacity to produce textiles at all, Natsir said.

He argued that textile producers, in turn, had to buy textiles from these individuals, resulting in higher production costs and uncompetitive selling prices for their products on the international market.

Natsir said that the industry's loss due to this practice could reach hundreds of billions of U.S. dollars because the total Indonesian quota was more than US$500 billion a year.

None of the ministry's top officials could be reached for comments as of Sunday.

Textile-importing countries, such as the U.S., Canada, and Europe, apply a quota system to several exporting countries, including Indonesia, China, and Vietnam, to limit their textile imports. Between 1974 and 1994 this trade barrier practice was known as the Multifiber Arrangement (MFA).

The current quota system was introduced in January 1995 and will end in January 2005, after which every textile-exporting country will compete freely to gain markets in those countries.

The governmental body which has the responsibility to assign quotas for local textile producers is the Ministry of Industry and Trade's Directorate General of International Trade, which is now headed by Sudar SA.

A textile analyst, Baari La Inggi, said that since the start of the quota system, the government had not been transparent in distributing the quotas, but nobody dared to question this unfair practice, he said.

"It is a common knowledge to every businessman that the allocation process is riddled with manipulation. However, no businessman has the nerve to even discuss it openly. It is a good thing that somebody now speaks up about it," said Baari.

He told The Post that the price of the quotas could be higher than the production cost of textiles.

"Textile businessmen understand what to do if they need quotas. Sometimes, we are willing to buy quotas at any price so that we can maintain our business relations with our foreign buyers," he said.

The murky quota allocation system has also been the reason why the country's banking sector has channeled credits for the textile sector, which is struggling to face tougher competition from rivals in China and Vietnam.

A top banker recently said unless the problem was addressed, banks won't issue credits for the industry, which is now in dire needs of revamping its machinery.