Textile association hails new export quota policy

JAKARTA (JP): The Indonesian Textile Association (API) on Friday welcomed the government's new regulation on the allocation of export quotas, calling it a concrete step towards eradicating rampant quota trading practices among textile producers.

API vice chairman Lili Asdjudiredja said that the new regulation allowed for a fairer allocation of export quotas among textile producers.

"Producers who need export quotas will have a greater opportunity to obtain them," Lili told reporters after a meeting between textile exporters and the Minister of Industry and Trade, Luhut Pandjaitan.

Luhut issued a ministerial decree on Thursday outlining the allocation of textile export quotas, whose key feature will allow the government to reallocate unused fixed quotas to other companies.

Lili said that the new ruling would raise the industry's overall textile export levels.

"Previously, a quota defined as fixed was absolute and could not be changed," he explained.

Because of their fixed status, and the inability of some companies to meet their quotas, brokers benefited from the situation by buying and then selling the unused quotas, Lili went on.

Manu Mirchandani, managing director of PT Pacific Rimasri Garments, estimated that brokers were controlling about 60 percent of the government allocated export quotas.

One of the biggest problems the government faced, Manu said, was how to recover the export quotas still in the hands of these brokers.

Not only did brokers control most of the export quotas, they also resold them at prices up to three times higher than the government did, he added.

"This is a real problem which inflates the industry's operating costs," Manu said.

He said that under the new policy he hoped that his company would have a better opportunity of obtaining a larger quota.

Although the regulation contained some loopholes, he said that it, nonetheless, specifically addressed the problem of export quota trading.

"I think it's good enough, quite positive," he said, adding that it would definitely have an impact on export quota trading activities.

"The regulation will be reviewed from time to time, we can only see how far the implementation of the regulation will be," Manu added.

Competitiveness

According to Luhut, some companies have also been given quotas that are too large, and beyond their export capacities.

He added that the government did not plan to limit the export quotas being held by textile exporters, as long as they were capable of absorbing them.

Luhut said that the government would take over the "trading" of export quotas, by allocating and re-allocating the quotas to companies which needed them most.

The minister had initially planned to auction unused quotas, but Luhut said that the system proved to be too complicated.

He further assured that the existing textile exporters would be capable of absorbing the unused quotas.

"They (quotas) will be absorbed because the demand for them is high, and that is what we are going to supervise," Luhut explained.

However, he warned that Indonesia cannot rely too heavily on export quotas in order to penetrate markets.

"We must prepare ourselves, because by the year 2005 there will be no more quotas, since everything will depend on the quality of our products," he explained.

Luhut said that, under the new quota policy, textile companies must already raise their competitiveness to make good use of their quotas.

"If we still grant protection (quotas) to several companies who can do nothing more than rely on it, then we will be in trouble by 2004," he said.

Some export markets, like the United States, Canada and Europe, issue textile quotas to developing countries like Indonesia.

However, the governments of these export markets will stop issuing export quotas by the year 2004.

According to the government, some 40 percent of Indonesia's total textile exports, this year worth an estimated US$8 billion, are absorbed by countries with textile quotas.

Based on U.S. Customs data, Indonesia's quota compliance as of December last year stood at 70 percent, which was slightly higher than that of neighboring countries.

Friday's meeting between Luhut and several textile exporters discussed ways of improving the industry's export performance. (bkm)