Textile plants moving from West Java to Central Java

JAKARTA (JP): Several small and medium producers of textile and textile-related products in West Java are relocating their factories to Central Java where business costs are cheaper.

The deputy secretary general of the Indonesian Textile Association (API), Irwandy Muslim, said yesterday the relocations were also prompted by the West Java administration imposing too many regulations.

He said high land prices in West Java made it expensive for companies to expand their manufacturing facilities.

"The productivity of workers (in West Java) has also failed to show any significant improvement since the government increased their wages," he said.

He was speaking on the sidelines of a seminar on the integration of the Multi Fiber Agreement (MFA) with the World Trade Organization (WTO) in 2005 and its impact on Indonesia's textile industry.

The government increased the minimum wage level in all 27 provinces by an average of 10.07 percent starting April 1.

With the increase, the minimum monthly wage for a worker in the greater Jakarta area (Jakarta, Bogor, Tangerang and Bekasi) and West Java now ranges between Rp 139,000 (US$58) and Rp 172,500.

In Central Java it is Rp 113,000 and in Yogyakarta it is 106,500, which is also the lowest in the country.

Irwandy said West Java's highly competitive market caused small and medium industries in the province to lose their share.

"In Central Java, the domestic market is not saturated yet and the productivity of the workers is better," he said.

The chairman of the Indotex Foundation, Chamroel Djafri, who is a senior advisor to API, said the government's decision to increase the minimum wage had been "very drastic".

He said government policies were among the many obstacles the textile industry faced.

These obstacles should be resolved by the time the MFA is integrated with the WTO, Chamroel said.

Chamroel said the services sector, which includes banking, insurance and trade services, was unable to provide enough support for the textile industry.

"On the national scale, there are numerous inefficiencies caused by red tape, poor tax systems, legal and illegal fees and sharp increases in utility costs like electricity, water and telephone services," he said.

Sources at yesterday's seminar said the government was planning to waive guarantee funds imposed on industrial machinery.

Many businesses, including those in the textile industry, have reluctant to sell their old machinery because the prices would be much lower than the guarantee fund that must be paid.

Indonesia's textile exports in 1994 reached $5.65 billion and increased 7.26 percent in 1995 to $6.06 billion.

In the January-November period of last year, exports reached $5.8 billion, or 6.22 percent higher than the corresponding period in 1995.

Textile products make up 19.9 percent of Indonesia's industrial exports and 12.84 percent of the country's total non- oil exports.

Indonesia's domestic market trades $8 billion worth of textile and textile-related products a year.

A lecturer at University of Indonesia's School of Economics, Menner Tatang, said Indonesia's per capita textile consumption was increasing 5.7 percent a year.

"This is twice the growth of the world's average per capita textile consumption of only 2.8 percent a year ... This means the textile industry has a very bright outlook," he said.

Yesterday's seminar presented several proposals to the government on Indonesia's preparation for the integration of the MFA with the WTO.

The integration will eliminate the quota system and textile trade will have to abide by and be supervised by WTO rules. (pwn)