Indonesia Ready to Lobby Textile Tariffs

JAKARTA - The government will lobby the government to lobby the US government to get special tariffs for textile products from Indonesia.

Director General of Chemical, Textile and Multifarious Industries (IKTA) of the Ministry of Industry, Achmad Sigit Dwiwahjono, said the special tariff demand effort will be delivered in a meeting between the Indonesian delegation and US authorities in June.

"Every year Indonesia imports 250,000 tons of cotton from the US We ask for trade-offs For products with cotton raw materials from the US the tariff when entering [to America] should be low. Now its import duties range from 8% - 17%," said Sigit, in Jakarta, Tuesday (27/3).

This pattern of commodity exchange becomes a temporary solution before the multilateral agreement and the blend of US and Indonesia is achieved. "The hope can be 0% but 5% max 5% is also good," he said.

Meanwhile, related to the trade war between China and the US, Sigit is seen as a serious challenge for the Indonesian textile industry. The reason, as much as 35% of China's total production is exported to the US.

"If there are obstacles from the US government, then 10% of total production dumped into Indonesia will be a serious problem for [Indonesian Textile Industry]," he said.

Opportunities to fill the US market left by China will not be easy because the state tariffs imposed on Indonesian textiles are still high.

Data from the Indonesian Textile Association (API) noted that the market share of Indonesian textile products showed a decline. Currently, Indonesian products dominate 4.5%, down from 5.2% in 2012. Conversely, US cotton imports continue to rise.

SOLUTION

Increased exports of Indonesian textile products to the US market will only be realized if the government solve the energy cost problem from the port that is still considered high.

API Secretary-General Ernovian G. Ismy said Indonesia's main competitors in seizing US markets as opposed to China are countries in Asia such as Vietnam, India to Bangladesh. Indonesia must compete in a lower market because textile products from China are known for their low prices.

"How to compete [price] with them [country of the region] then it should be seen the cost structure Do we send expensive American products to buy?" Of course not, "Ernovian said Tuesday 27/3.

Cheap wages that some time ago could be an advantage in Indonesia is now over. Indonesia's competitor countries on average have applied the same wage.

As a result, the current problem shifts to productivity. With relatively similar wages, countries in the region can produce higher amounts of garments and textile products.

As illustrated in the API notes, working hours in Malaysia are 2,344 hours per year, India (2,256 hours per year), Vietnam (2,234 hours per year), Bangladesh (2,208 hours per year), Cambodia (2,152 hours per year), Pakistan (2,272 hours per year), Sri Lanka (2,054 hours per year), China (1,952 hours per year), while Indonesia (1,816 hours per year).

Ernovian hopes that this long-term cost structure can be solved. Requires government-specific policies for these industries to grow higher.

In a separate development, subsidiary of PT South Pacific Viscose (SPV) Lenzing AG, Austria, confirmed the transfer of rayon plant investment from Indonesia to Thailand, as it did not get certainty of investment support.

Head of Corporate Affairs SPV W. Nugroho Sahib stated in 2017 that it has met with the Ministry of Industry to request the location and tax facilities before deciding on additional investments in Indonesia.

"At that time we wanted new investment and asked for a new location other than Purwakarta, but the government did not provide certainty," said Nugroho in Jakarta, South Sulawesi.

Different responses were obtained from the Thai government. After meeting with local authorities, Lenzing immediately got an official letter regarding tax facilities such as tax allowance and tax holiday up to a special price for natural gas used by the company. The company finally chose to put its investment in Thailand. "The Thai factory is targeted to be completed by 2020," he said.