Textile industry calls for a delay in AFTA

Textile industry calls for a delay in AFTA

Fitri Wulandari, The Jakarta Post, Jakarta

The Indonesian Textile Association (API) appeals to the
government to delay slashing down import tariffs on textile
products as the ailing local textile industry is not yet ready to
compete with foreign players.

"Our textile industry is not ready to compete with others
(foreign textile makers) because there are many policies at home
that have made our textile products less competitive," Lili
Asdjudiredja, an executive at API told The Jakarta Post last
week.

He cited factors like the unfavorable labor law, high interest
rates, high labor wages and the absence of tax incentives.

Import tariffs on textile products is supposed to come down to
between zero and five percent next year as part of the
implementation of the Asean Free Trade Area (AFTA).

The six original members of Association of Southeast Asian
Nations (ASEAN)-- Malaysia, Thailand, Indonesia, Brunei, the
Philippines and Singapore started the gradual implementation of
AFTA earlier this year in a bid to boost regional trade.

Sunjoto Tanudjaja, the head of international relations and
foreign trade at API concurred with Lili, saying the deadline for
scrapping the tariff barrier was too soon.

"When we agreed to join AFTA, our economy was still good. But
with the current (economic) condition, we need sometime to
restore the industry," Sunjoto said.

Both Lili and Sunjoto agreed that it should be delayed for at
least another three years to give time for the industry to
recover.

"There are many problems that need to be fixed ... our
industry is still adjusting to the condition," Sunjoto said.

In addition, they said, the three-year period would provide
room for the country's textile industry to prepare for free
competition in the global textile industry which will start in
2005. Under the World Trade Organization (WTO) guidelines, global
textile industry will enter free trade market in 2005 as
developed countries, such as the United States and Europe, had to
eliminate their quota system by that year.

Sunjoto said that the government currently applies an average
tariff of between 20 percent to 30 percent for textile products.

Once considered the most promising sector in the country, the
country's textile industry is facing a downturn following the
economic crisis in late 1997.

Before the crisis, Indonesia was ranked the 10th largest
textile producers and now has plunged to 17th.

Textile exports declined by 0.07 percent to US$ 7.433 billion
from $7.438 billion in 1997. It took a nose dive in 1999 to
$2.279 billion but then it picked up sharply to $8.377 billion
the next year.

Last year, the commodity's export was down again to $7.6
billion. Sunjoto predicts this year's exports would only reach $7
billion.

The industry succumb to myriad of problems from high interest
rates, lack of trade financing facilities, slow progress in debt
restructuring, rising minimum wages, labor conflict and the
increasing cost of energy and infrastructure.

The problems are being aggravated by rampant smuggling and
illegal levies imposed by corrupt officials.

The massive influx of smuggled textile products, especially
from China, has also deteriorated the industry.

Meanwhile, a growing number of companies have closed down
their operations, causing hundreds of thousands losing jobs.

Data from API shows that at least 40 textile companies are
running at a financial loss, while 76 others have closed down
their businesses.

Lili, who is also chairman of API West Java chapter, said that
the number of textile companies closing down their business in
the province is adding up.

Lili said that the government simply does not care with the
problems faced by the industry.

"The government has not taken strong measures against
smuggling nor settling labor disputes or have a clear policy
about the industry. They just don't care about it," he
criticized.