Yogyakarta silver craft business in the doldrums
Slamet Susanto, The Jakarta Post, Yogyakarta
Kotagede's famous silver businesses are on the verge of closing down due to the imposition of a 10 percent value-added tax (VAT) on raw materials.
The tax, which was imposed on August 2002, has increased the price of silver raw materials, which also has subsequently increased the production cost of silver goods.
In order to cover high production costs, silver craftsmen in the town of Yogyakarta have raised the price of their silver products. This means that they can no longer compete with Thailand's silver industry, which is able to sell silver products for less.
A silver craftsman, Edi Sudarmanto said, "Frankly speaking, we have difficulties in competing with Thailand. The quality is on a par with ours, but the price is now cheaper. Their government has provided subsidies for silver craftsmen, whereas we are burdened by the value-added tax," said Edi.
Head of Kotagede Silver Craftsmen Cooperative, Sutojo, said the imposition of the 10 percent VAT in 2002 had caused silver prices to increase from Rp 1,700 (18 U.S. cents) per gram to between Rp 2,100 and Rp 2,500 per gram.
"We can't increase the sale price of silver products anymore, as they are already expensive. Due to the difficult situation, many craftsmen have suffered losses causing them to shut down their businesses," said Sutojo.
Only 50 out of 108 craftsmen registered as members of the cooperative are still producing silver now, while just 40 craftsmen out of 100 non-members continue to operate.
"The main reason for them going bankrupt is the imposition of the 10 percent VAT. The condition has clearly weakened the competitive power of craftsmen," Sutojo added.
He said that some of the craftsmen had been forced to reduce production capacity in Kotagede just to be able to stay in business. From the average production of 400 kilograms per month at Rp 4,000 per gram (before the imposition of the VAT), production had decreased to 150 kilograms per month, said Sutojo.
He added that the cooperative had demanded that the central government exempt the silversmiths from the tax several times, but to no avail.
Similarly, Edi Sudarmanto explained that the rise in raw material prices had left hundreds unemployed in Kotagede. On average, each craftsman employs five to 10 people. More than 100 craftsmen have stopped producing silver products thus far, he claimed. "More than 500 people are now unemployed since the rise in raw material prices. I was forced to dismiss six of my 12 workers," said Edi.