Chinese textiles flood local market

The Jakarta Post, Jakarta

After eight years in the garment industry, Supena is savvy enough to know that one must keep abreast of the latest trends to stay in business. That includes the use of imported textiles, regardless of the legality of the practice.

"We are now using fabrics from China," said Supena, whose factory in the West Java town of Tasikmalaya employs 200 people. "Otherwise, we would have to close shop."

Although he suspected the polyester he purchased from a broker was smuggled into the country, the savings was too great for him to ignore: Rp 2,300 (24 US cents) per meter for the Chinese polyester compared to Rp 7,000 per meter for Indonesian-made polyester.

As more local garment businesspeople switch to imported products, mainly from China and South Korea, local textile manufacturers are growing concerned.

"About 60 percent to 70 percent of textile products in the domestic markets are imported, legally or illegally," said Herris, the head of the wholesale division at the Jakarta branch of the Indonesian Textile Association (API). "If this continues, a lot of factories will have to close down."

He said the association arrived at its figure of imported textile products after conducting surveys at textile markets throughout the country -- Tanah Abang and Cipulir in Jakarta; Bukit Tinggi in West Sumatra; Medan in North Sumatra; and Bandung in West Java.

According to Herris, a significant number of the imported textiles were illegally smuggled into the country through various ports.

"Buyers used to come to Tanah Abang to buy textiles and garments," said Herris, referring to the largest textile market in Southeast Asia, which has a daily turnover of Rp 150 billion.

"Now it is the other way around. Tanah Abang vendors are going to places like Bukit Tinggi because that is where the cheap imported goods are.

"Customs and excise officials are not doing their jobs or are pretending that nothing is happening," he said.

Imported textile products are assessed a customs tax of up to 15 percent and a mandatory value added tax of 10 percent.

API chairman Benny Soetrisno said the flood of imports was worrying.

"The domestic textile market has been disrupted by the smuggled products," he said, adding that the government would lose potential tax revenue if it continued to ignore the problem.

Economist Aviliani from Jakarta-based Paramadina University said the increase in smuggled textiles was cause for concern.

"People who used to be manufacturers are now turning into traders," she said, adding that if this trend continued the estimated 1.2 million textile workers in the country would begin to lose their jobs.

However, she said the more fundamental issue was the textile industry's lack of competitiveness and productivity compared to China.

"The cost of the bureaucracy here is high," she said. "Also, the minimum wage makes the industry inefficient.

Aviliani's opinion is shared by the API's head of human resources, Indra Ibrahim.

"It is pointless to be jealous of China's ability to produce cheaper products. It is more important that we improve our own competitiveness," he said, adding that Chinese textile workers were about 50 percent more productive than Indonesians.