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Aside from quota allocations and outdated machinery, Benny said the industry had become less competitive due to unfavorable government policies and the high terminal handling charges (THC) at ports.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