RI's textile industry may collapse by 2005: Association

RI's textile industry may collapse by 2005: Association

Antara, Jakarta

Indonesia's textile industry may collapse, especially after the abolishment of the quota system in January 2005, if the government fails to create a climate in which the industry can compete in the domestic and overseas markets, an industry spokesman said.

"If the situation continues to deteriorate, the textile industry will collapse by 2005. This will especially happen to export-oriented industries producing the same goods as their foreign competitors," chairman of the Indonesian Textile Association (API) Benny Soetrisno said here Wednesday.

Currently, Benny said, the textile industry had to bear an increasing burden from illegal levies and taxes as well as new legal levies as a consequence of regional autonomy.

The situation was compounded by an unfavorable business climate marked by high interest rates, lack of trade financing facilities, stagnation in capital restructurization, increasing minimum wages, labor unrest, and the increasing cost of energy and infrastructure, he said.

"Those factors have affected the competitiveness of export- oriented industries. An API survey has shown that the business climate in Indonesia is not as good as in our potential competitors such as China, Vietnam, and Thailand," Benny said.

As a result, textile exports had been declining significantly since the economic crisis hit Indonesia in mid 1997.

In 1998, textile exports declined by 0.07 percent to US$7.433 billion from $7.438 billion in 1997.

The exports plunged in 1999 to $2.279 billion but then sharply increased to $8.377 billion in 2000.

In 2001, the commodity's export dropped by 24.74 percent to $6.304 billion.

According to Benny, at least 40 textile companies were running at a financial loss while 76 others were unable to conduct their activities normally.

"As many as 76 factories have closed down. Some of them possibly relocated to other countries because of heavy burden that have to be borne at home," he continued.

The textile industry is facing serious difficulties due to unfavorable business climate in Indonesia, he said.

Unfortunately, instead of making concrete efforts to improve the situation, some related institutions were involved in smuggling, increasing port and transportation fares, and other activities which could lead to the collapse of domestic industry, Benny said.