Govt to redistribute unused textile quota

Zakki P. Hakim, Jakarta

The Ministry of Industry and Trade plans to meet with textile and garment associations next week to review how the industry has utilized this year's export quota for the U.S. market.

Minister Rini MS Soewandi said on Friday that textile and apparel makers that had not utilized their quotas should let other companies use them.

"After the meeting we will publish openly the status of the quotas," she said.

The minister will meet with the Indonesian Garment Producers Association (APGI) and the Indonesian Textile Association (API).

Rini said she would redistribute unutilized quotas to apparel producers which had received orders from U.S. buyers but could not fulfill the order because they do not have a quota.

She was responding to an earlier report citing data from APGI that the average utilization rate of the quota for the U.S. market until July 26 stood at a mere 28.4 percent. The association urged the government to redistribute the quota to other companies in a bid to push export.

The U.S. is one of the Indonesia's key export markets for textile products. Last year, textile and garment exports reached US$7.03 billion.

The World Trade Organization has ruled that the quota system (applied by the U.S., European Union, and Canada) must be terminated by Jan. 1, 2005.

The quota system has benefited Indonesian textile and apparel makers for years as less efficient producers 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.

But there are fears now that the local textile industries would have difficulty competing in the export market with more efficient producers, particularly from China.

The textile and garment companies here have suffered various problems including aging machinery, huge debt load, and lingering labor conflict.

The above problems is one reason why the utilization rate of the export quota has been low. In addition, some of the quotas had gone to people who do not have a textile business at all. They obtained the quota from corrupt officials with the intention of reselling them to textile exporters.

Rini has urged local manufacturers on various occasions to shift to producing textile and garment products for the middle to upper market segment in a bid to compete in the export market after the quota system ends.

Most of Indonesia's textile and apparel products have targeted the lower to middle-income segment.

Table

RI garment exports to U.S. (Selected items)

Type of products Quota limit Utilized (%)

(in dozen) Coats 430,161 252,207 58.6 Dresses 1,201,542 512,518 42.7 Knit shirts & blouses 2,418,315 1,451,923 60.0 Shirts, not knit, M&B 2,932,054 1,293,273 44.1 Shirts W&G 1,797,447 1,050,260 58.4 Skirts 715,200 451,854 63.2 Sweaters 876,474 105,554 12.0 Trousers 3,276,042 1,977,973 60.4 Nightwear 989,569 164,398 16.6 Suit type coats 12,565 3,748 29.8 Trousers, shorts M&B 19,559 1,440 7.4 Trousers, shorts W&G 26,871 1,041 3.9 Trousers, breeches 5,956,332 3,028,197 50.8 Coat, W&G 57,853 7,657 13.2

Source: U.S. Customs' Textile Status Report dated July 26