RI's THC 75% higher than neighboring countries

RI's THC 75% higher than neighboring countries

Abdul Khalik
The Jakarta Post
Jakarta

In its latest bid to bail out the country's troubled textile
industry, the government has set up a task force, comprising the
government and the business community, to identify problems in
the industry and find solutions.

The task force is headed by Ministry of Industry and Trade
Rini Soewandi and the ministry's Directorate General of
International Trade, Sudar SA, who will work with top officials
from state-owned banks and the textile association. It will work
under the supervision of the Coordinating Minister for the
Economic Affairs Dorodjatun Kuntjoro-Jakti.

The task force, formed last Friday during a meeting involving
officials from the ministry, banking and textile industries, will
meet once each week to detail all major problems and recommend
steps to solving them.

These steps are expected to enable the industry to compete
with other exporting countries in the post quota era starting in
January 2005 while achieving a target of 5 percent growth in
textile exports in 2004.

"We expect everything -- from problem identification to the
issuance of governmental regulations to solve the problems -- to
be completed before the establishment of the new government," the
Indonesian Textile Association's (API) chairman for Greater
Jakarta, Benny Benyamin, told The Jakarta Post on Tuesday.

Friday's meeting was held following the continued reluctance
of the banking sector to lend to the industry, which needs new
funds to repair its outmoded machinery.

Banks fear that textile firms are too high of risk, given the
numerous problems, including the murky quota allocations by the
government, and the tighter competition waged by competitors such
as China and Vietnam.

Aside from quota allocations and outdated machinery, Benny
said the industry had become less competitive due to unfavorable
government policies and the high terminal handling charges (THC)
at ports.

Based on Decree No. 155/2001 from the Ministry of Finance,
cotton was not officially a strategic commodity anymore, and the
importation of cotton, the main raw material for fabric and
textiles, now carries a 10 percent import duty.

The duty affects the competitiveness of products from
Indonesia as 98 percent of the total amount of cotton used is
imported while most textile importing countries, such as China
and Vietnam have no duties on cotton imports.

The decrease in Indonesia's total textile exports since 2001
shows the significant impact of the import duty policy. After the
export value reached US$8.2 trillion in 2000, the export value
fell to $7.2 trillion in 2001, $6.8 trillion in 2002, and
slightly increased to $7.03 in 2003.

Another burden is the taxes imposed on a factory which has a
power generator. Factories usually use their own generators to
preempt the frequent power failures, when relying on state-owned
electricity firm PLN. However, aside from the monthly tax for
having a generator, factories are obliged to pay the so-called
"tax on public road lighting" (PPJU) despite the fact that they
do not supply the electricity outside their compounds. The PPJU
tax ranges from 3 to 10 percent of electric use depending on the
province.

Regarding THC, quoting reports from the Jakarta-Japanese Club,
Benny said Indonesia had the highest THC in Asia in the 2003-2004
period, about 75 percent higher than the region's average.