Govt plans to raise export taxes on raw leather

The Jakarta Post, Jakarta

The government plans to reimpose export duties on raw leather to ensure sufficient supplies of the commodity on the local market, a senior official at the Ministry of Industry and Trade said on Monday.

Ferry Yahya, the ministry's director of agricultural and mining product exports, said the export duties would be set at between 20 percent and 25 percent, compared to zero percent at present.

"Minister of Finance Boediono has in principle agreed to reimpose the export duties. We are now waiting for the issuance of a ministerial decree," Ferry told The Jakarta Post, adding that the new policy was in line with demands from the industries that relied on raw leather.

Calls for the reimposition of the export duties have come from the Indonesian Tanners' Association and the Indonesian Footwear Association, both of whom claimed the zero duty policy applied by the government to raw leather had resulted in supply shortages on the local market, thus hurting their businesses.

They also called on the government to ease the rules curbing the commodity's importation.

Export taxes on raw leather stood at between 200 percent and 300 percent before the government totally removed them to comply with the economic reform program agreed upon with the International Monetary Fund (IMF).

Exports of the commodity then surged on the rise in its price on the international market, causing a shortage of supplies on the local market.

The situation worsened following the government's move to impose tighter requirements on the importation of the commodity amid fears that imports could bring foot-and-mouth disease into the country.

Indonesia imports raw leather from India, Pakistan, Brazil, Australia, Argentina, France, Germany and the United States.

The number of local tanneries has continued to decrease due to the lack of raw materials.

Data from the industry associations earlier showed that there were now only 47 mid-sized and large tanneries across the country with a total production of 72.5 million feet per year compared to 112 tanneries with a total annual output of 210 million feet in 1998.

The number of tannery employees also declined from 12,560 in 1998 to 8,670 in 2000 and 5,620 in 2001.

The association claimed that plants owned by local companies were now running at only 22 percent of capacity.

The lack of raw leather supplies had also hurt the country's footwear industry, which employs millions of workers.