Tanners ask for export tax on leathers

Adianto P. Simamora, The Jakarta Post, Jakarta

The Indonesian Tanners Association has renewed calls for the government to reimpose export tax on raw leather to ensure sufficient supplies at home, noting that many local tanneries have been closed or were facing bankruptcy due to limited supplies of raw materials.

The association also urged the government to ease its rules curbing raw leather imports.

"That's the only way for the government to ensure the country's tanning and leather industry survives," association chairman Diyono Hening Sasmito told The Jakarta Post on Thursday.

Data from the association indicates that the number of tanneries have steadily decreased since the government removed export tax on raw leather in 2000 to meet the economic reforms set by the International Monetary Fund (IMF). In 1998, the export tax stood at between 200 percent and 300 percent.

Today, there are 47 medium and big tanneries across the country with a total production of 72.5 million feet per year, as against 112 tanneries with a total annual output of 210 million feet in 1998.

"We are almost dead. We now run at only 22 percent of our capacity," Diyono said.

The removal of tax imports on raw leather had resulted in the lack of raw materials on the local market. And the situation worsened after exporting countries such as India, Pakistan and Brazil limited their exports.

Aside those countries, Indonesia also imports raw leather from Australia, Argentina, France, Germany and the United States.

To make matters worse, the Ministry of Agriculture's Directorate General for Livestock Production issued a decree in 2001 banning the importation of raw leather, including wet pickle, wet blue, crust and finished leather from several countries for fear the commodities could bring foot-and-mouth disease into the country.

"Tens of thousands of workers have been laid off following the closure of hundreds of tanneries over the past several years," Diyono said.

He warned of thousands more layoffs this year unless the government reimposed export tax on raw leather.

Tanneries' workers have declined from 12,560 in 1998 to 8,670 in 2000 and 5,620 in 2001.

The downturn in the country's leather industry will certainly hurt the country's footwear industry, which employs millions of workers and is one of the country's major contributors of foreign exchange earnings.

The association said it had discussed the problems several times with related officials at both the Ministry of Industry and Trade and the Ministry of Agriculture.

In response to the hardship, Minister of Trade and Industry Rini M.Soewandi recently sent a letter to Finance Minister Boediono asking the ministry to set the export tax on raw leather at between 20 and 30 percent.

The association together with some 23 associations on Monday brought their complaints to members of the House of Representatives of Commission V overseeing the trade and industry affairs.