Textile association hails new export quota policy

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)