Firms face problems in availing of textile quotas

Firms face problems in availing of textile quotas

Zakki P. Hakim, Jakarta

The Indonesian Garment Producers Association (APGI) urged textile
and garment makers who have not utilized their export quotas for
the U.S. market to let other firms utilize them in a bid to push
exports.

APGI chairman Natsir Mansyur said that the companies should
return the unutilized quotas to the Ministry of Industry and
Trade, which would distribute them to other firms.

"That way we would have a better chance of meeting the quota
limit and increasing our total exports," he told The Jakarta Post
and Investor Daily on Wednesday.

Natsir said that the utilization rate of the export quota had
been very low.

He pointed out as an example that out of the 876,476 dozens of
sweaters ordered by the U.S. from Indonesia this year, local
manufacturers had so far only been able to export 105,554 dozen,
or around 12 percent of the designated quota.

The utilization rate of the export quotas for nightwear and
blazers were also relatively low at 16.6 percent and 29.8
percent, respectively, according to data from the U.S. customs
office. But the utilization of the quotas for coats and dresses
were higher at 58.6 percent and 42.7 percent.

The U.S. is set to terminate the quota system on Jan. 1, 2005.
The quota system has benefited Indonesian textile and apparel
makers for years as less efficient producers like Indonesia could
still export their products to the U.S. without fear of being
sidelined by more efficient competitors as long as they had a
quota.

There are now fears that the termination of the quota system
will spell trouble for inefficient local exporters. The U.S. is
one of the country's major export markets.

There are various reasons for the low utilization of the
export quota. One reason is that over the past couple of years
the country's textile industry has been plagued by a host of
problems, including labor conflicts, rising labor costs and aging
machinery. Many companies have either gone bankrupt or are
producing at below capacity.

The director of the textile industry at the Ministry of
Industry and Trade, Luky Hartini, said that dated machinery had
reduced the quality of some local products, which in turn
discouraged U.S. buyers from buying the products despite the
concerned company having a quota.

Some analysts say that corruption and collusion between
government officials and crooked businessmen have contributed to
the problem of low utilization as some of the quota holders have
no textile or garment factory at all. The well-connected people
act as rent-seekers trading their export quota to authentic
textile companies.

According to data from the Ministry of Industry and Trade,
18.41 percent of the listed textile and garment exporters in 2001
had no factories at all.

Luky said that many companies could not replace their aging
machinery as they had been saddled with huge debts and poor
cash flows.

Textiles and garments was one of the country's main non-oil
and gas export products prior to the financial crisis. The
government estimates that textile and apparel exports to increase
to US$7.5 billion this year from $7.03 billion last year.