Textile war is on ahead of WTO cut
Textile war is on ahead of WTO cut
Zakki P. Hakim, Jakarta
The government and the local textile industry are clearly
worried about taking on China in the U.S. and EU market when the
World Trade Organization removes all quota systems on Jan. 1,
2005.
Forget next year -- the battle is already taking place, not on
foreign soil, but here in Tanah Abang, Central Jakarta, the
region's largest textile market. Casualties have fallen to the
influx of Chinese textile products and more are thought to come.
The market, which is home to 7,500 kiosks owned by some 4,700
traders, turned over Rp 15 trillion a year until a fire burned it
to the ground in February 2003.
One of the casualties is 29-year-old Rusdy Said, who runs a
family business that was started in the late 1960s. It has
suffered approximately Rp 600 million in losses in five months
thanks to Chinese textile products.
"Earlier this year, I bought a local brocaded fabric at Rp
11,000 per meter. Then, Chinese fabrics entered and sold for Rp
7,000 per meter. Today, frantic local traders sell their products
at Rp 5,000 per meter. How can I make a profit, let alone
survive?" he told The Jakarta Post.
According to Rusdy, the Chinese products penetrated Tanah
Abang after last year's fire, most of which were smuggled into
the country.
"Almost 60 percent of textile products now sold in Tanah Abang
are from China," said Rusdy, who was forced to lay off 10 of 20
employees to cut costs.
He went on that many traders now chose to relabel imported
Chinese products for export to Africa.
"Chinese products are taking the locals' market share in
Africa," he said, adding that he was unsure whether his business
would survive until the end of this year -- the same worry voiced
by thousands of fellow traders in the market.
Director of Institute for Development of Economics and Finance
(Indef) Aviliani said the government should draw up a blueprint
to revitalize the upstream-to-downstream industry toward
gradually improving its future competitiveness against China.
In the meantime, the government could encourage the textile
industry to innovate in terms of design and production systems.
China can produce textile products that are better in design
and lower in cost than locally made products, because it has an
integrated system from upstream to downstream, Aviliani said
during a workshop on Chinese and Indonesian textiles.
Analyst Poltak Hotradero, who specializes in Chinese economy,
explained during the workshop that China was able to make cheaper
textiles because it produced cotton and machinery itself.
Furthermore, textile producers were protected against the
fluctuation of the U.S. dollar, since their goods were all bought
in the local currency, yuan, which is pegged to the dollar.
In contrast, Indonesian producers import their cotton and
machinery and are thus vulnerable to currency fluctuations.
"China has encouraged investors to establish factories in the
country and has ensured a transfer of technology ... apparently,
China has succeeded," Poltak said.
The current quota system has benefited Indonesian textile
producers, enabling them to export their products to countries
such as the U.S., despite their lower efficiency than Chinese
producers.
Over the past couple of years, the country's textile industry
has been plagued by a host of problems, including labor disputes,
rising labor costs and ageing machinery. In addition, many
textile companies have either gone bankrupt or are producing
below capacity.