Hotel and textile sectors fear hike in fuel prices

JAKARTA (JP): The hotel and textile industries, two sectors on the front line of Indonesia's export thrust, will be severely hurt by the government's plan to increase domestic fuel prices by up to 20 percent in April, executives from the two industries told The Jakarta Post on Friday.

Sugeng Setyadi, senior executive at the Indonesian Hotel and Restaurant Association (PHRI), and Irwandy Muslim Amin, executive director of the Indonesian Textile Association (API), said the increase would undermine Indonesia's ability to compete in the global market.

The government, under pressure to plug a huge budget deficit, has begun to sound out the planned increase, while not ruling out the possibility of a delay in its implementation on April 1 should there be massive public opposition. The Ministry of Energy and Mineral Resources has also disclosed the possibility of introducing the 20 percent increase in several phases.

Sugeng contends that the fuel price increase would set off a chain reaction on other domestic cost components, which account for 60 percent of total operating costs.

"After fuel, the cost of basic commodities and workers' salaries come next. But we can't increase the hotel tariff just like that," said Sugeng, who heads the association's manpower department.

Hotels would prefer to maintain their tariffs so that Indonesia's tourism industry remains competitive, he said.

Some hotels are also obliged to maintain their rates under contracts negotiated with travel agencies and large customers, he said.

The increase in fuel prices would be an additional burden for the industry on top of possible increases in electricity rates and land and property taxes later this year, he added.

To ease the hotel industry's woes Sugeng suggested that the government provide some form of tax break.

Irwandy said the fuel price hike would be likely to force textile manufacturers to increase their prices, which in turn would render them less competitive in the export market.

In the fiber and spinning sectors the increase could be as large as 30 percent, while in others, like the garment sector, the increase would be smaller, he said.

The fuel cost increase comes at a time when the textile industry is facing a tighter market because of the slowing down of the United States economy, Indonesia's largest market.

The government is also considering forcing Indonesia's export- oriented companies to pay fuel prices at world market rates. If this idea were to be approved it could mean that exporters, including those in the textile industry, will face fuel cost increases of up to 400 percent. (05)