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