The government has imposed a safeguard measure to protect local producers of nails and wire against a spike in imports from China and Malaysia, by introducing additional fees on imported goods of this type.
The measure will remain effective for three years, from Oct. 1 this year to Sept. 30, 2012. In the first year of implementation the measure imposes an additional fee worth 145 percent of the import value of goods, 115 percent in the second year and 85 percent in the final year.
A safeguard measure is a mechanism under the World Trade Organization, which allows governments to protect specific home industries from the negative impacts of a spike in imports of any products causing serious damage to a domestic industry that produces directly competing products.
The decision to introduce the safeguard measure came following a recommendation from the Indonesian Trade Protection Committee (KPPI), which had conducted a one-year investigation into the impact of the spike in imports.
The KPPI concluded that an increase of imports of nails and wire from the two countries had impacted local manufacturers, and it recommended the Finance Ministry to impose the additional fee.
The fee is charged on top of the 12.5 percent import duty on both products.
The measure is specifically targeting Chinese and Malaysian products, thus demanding other exporters specify the countries of origin of their products.
The Indonesia Iron and Steel Industry Association (IISIA) hailed the government’s decision as an effective move to save the local industry form the verge of collapse, giving them three years to improve their competitiveness.
The government’s move was a result of intense lobbying from local producers, IISIA nail and wire group head Ario N. Setiantoro said Wednesday.
“We are very relieved, Alhamdulillah [praise God]. After 200 days ... we have finally got the safeguard measure,” he told The Jakarta Post after the association’s meeting on the ruling.
Ario said the spike in imports from China was first felt in 2005 when domestic players began to see their sales decline.
“There was a tremendous jump, followed by a threefold increase to 120,000 tons in 2008 from about 40,000 tons in a year earlier,” Ario said.
Producers speculate that the significant increase in import volume was a result of a free trade agreement signed by China and ASEAN (of which Indonesia is a member) in 2004. The agreement allows a gradual cut on import tariffs on most products including nails and wire.
An inability to compete with the Chinese products, Ario said, had forced at least 10 nail and wire producers (also members of the IISIA) to close in 2008, resulting in the dismissal of thousands of workers.
The influx had also caused the industry’s production capacity to drop from 80 percent in 2006 to only 30 percent at the end of 2007, he said.
“All 10 companies that had shut down earlier, may not be able to resume operations. However, the remaining producers can now boost their production again, increasing national utilized capacity.
Hopefully, there will be no more dismissals and factories shutting down.”
Meanwhile, the remaining producers have just three years “to improve themselves and become more efficient”, Ario said, referring to the period of the ruling.
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