Textile industry told to fix problems before quota axed

Textile industry told to fix problems before quota axed

Evi Mariani, The Jakarta Post, Jakarta

The country's inefficient textile and garment industry has been
told to get its act together in order to survive tougher
competition in the export market particularly when the global
quota system is removed at the end of next year.

"I think textile makers that are already competitive and
efficient will not be affected too much by the quota
elimination," Indonesian Textile Association's (API) head of
international relations and foreign trade Sunjoto Tanudjaja told
The Jakarta Post in a recent interview. "However, those that
rely heavily on the quota system will indeed face difficult times
unless they tidy up their operations."

The current system of quotas, imposed by the U.S., the
European Union and Canada in the mid-1970s against developing
countries, mostly in Asia, will be removed as part of a World
Trade Organization liberalization drive. This will allow
efficient producers to dominate the world's more than US$500
billion textile and garment market.

The quota system limits the amount that a producing country
can export to the developed countries. In actual practice, it
meant that efficient producers, from a country such as China for
example, could only export a relatively small percentage of what
it was capable of producing, thereby allowing other more
inefficient countries to sell similar amounts to meet worldwide
demand.

While some analysts said that efficient producers from China
are set to gain most from the liberalization drive, there are
concerns that textile makers from Indonesia which have been
struggling with various problems like the lack of financing to
upgrade old machinery and lingering labor conflict could face
difficulties to win competition against more efficient regional
neighbors. Textile and garments have been one of the main non-oil
and gas export products. The sector also employs millions of
people.

The government, however, has not shown a great deal of concern
about the threat.

"I've been asked several times, 'Will our textile industry
face a slump?'," Minister of Industry and Trade Rini Soewandi
said in a meeting with the government WTO negotiation team, last
week.

"I have always replied that there will never be a 'sunset' in
our textile industry as we are a country of 220 million people,
how could the industry die?" she wondered.

The director general of foreign trade at the Ministry of
Industry and Trade, Sudar SA told the Post that the government
had not yet formulated any special plans to help textile and
garments makers deal with the tougher export competition.

Asked whether upgrading its machinery would help boost the
efficiency and productivity of the textile sector, Sunjoto
claimed that machinery was only a small part of the larger
problem.

"What is more important to be addressed first is fundamental
issues like labor laws, cost structure, taxation laws and
investment laws," he said. "Once those matters are settled, we
can talk about machinery and all."

He added that although the industry was ailing, the Indonesian
textile industry still had an advantage in terms of its
diversified products.

"In an international seminar in Brussels three months ago, a
presenter from Washington (in the U.S.) told the participants
that in terms of diversified products Indonesia would rank number
five after the quota elimination," he said.

He added that he felt optimistic that if the textile industry
quickly resolved its fundamental problems, instead of being a
loser, Indonesia would gain from the quota elimination.

Reports showed the textile industry absorbed about 3.5 million
jobs. However, a government report showed there were 242 textile
companies that went bankrupt last year, putting about 19,000
people out of work.

Before the late 1990s economic crisis, Indonesia ranked number
six in the world in terms of textile export value. "But now,
Indonesia in no longer in the top ten," Sunjoto said. "We are
12th now."

.rm70
Export value of RI's textile and apparel makers
(in million U.S. dollars)

No.Destination 1998 1999 2000 2001 2002

country
I Quota-relying 3,198.7 3,202.4 3,755.2 3,615.0 3,200.3

manufacturers

(total)
1. The U.S 1,731.6 1,766.9 2,206.0 2,206.7 1,980.9
2. The EU 1,392.2 1,352.5 1,449.2 1,305.4 1,127.6
3. Canada 72.9 80.4 97.4 102.9 91.7
4. Norway 1.9 2.4 2.5 - -

II Non-quota 4,191.7 4,033.5 4,581.4 4,184.0 3,762.7

manufacturers

(total)

Source: BPS