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APSyFI: The national textile industry is headed for a trade deficit, 2018 exports grow 1% and imports grow 14% (yoy).--IKATSI: The growth of the national textile industry is still hampered by floods of imports, Indonesia needs a clothing security law.

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Home arrow Latest News arrow Condition of Textile Industry and Textile Products (TPT) Problems And Proposed Solutions

Condition of Textile Industry and Textile Products (TPT) Problems And Proposed Solutions PDF Print E-mail
Written by Maizer   
Friday, 20 September 2019

1. TPT upstream industry conditions and performance:

• Consumption of world textile raw materials 99 million tons (25% cotton, 58% polyester, 7% rayon, others 10%).

• Consumption of 2.4 million tons of national textile industry raw materials (30% cotton, 51% polyester, 14% rayon, others 5%)

• Indonesia's polyester capacity is 1.7 million tons (the 5th largest in the world) and rayon (800 thousand tons) the third largest in the world. New investment only occurs in the rayon industry, there is no investment in the polyester industry.

• Domestic producer production utilization continues to decline each year until now only 55% (2018: 68%) as a result of falling consumption of yarn and fabric producer raw materials resulting in the closure of two upstream companies in 2017 and the termination of several production lines in 2019.

• The decrease in consumption of yarn and fabric producers' raw materials is caused by the increasing flood of imported yarn, fabric and apparel products in the domestic market.


2. The growth of the National TPT industry continues to improve until the second quarter of 2019 shows a growth rate of 20.71% (yoy), but this condition is only supported by the export performance of the garment industry only while producers of fiber, yarn, fabric and garment oriented in the domestic market are increasingly depressed by imported goods.

• The 10-year trade performance tends to decline eroded the trade balance (3% average export growth, 10.4% import, trade balance -5.5%) so that the TPT trade balance is threatened with a deficit in the next 2-3 years.

• 2018 garment trade balance has a surplus of USD 7.7 billion but the trade balance for textiles is a deficit of USD 4.5 billion so that the total textile trade balance surplus is only USD 3.2 billion (in 2007 the TPT trade balance reached USD 7 billion)

• Semester 1 2019, the garment trade balance is still USD 3.5 billion while for textiles it is still a deficit of USD 1.8 billion so the total trade balance of TPT is only USD 1.8 billion.

• The rapid flow of imported goods depressed the national textile industry and caused the eroded trade balance to a deficit.


3. Consumption of TPT in the domestic market grows in line with economic growth and public consumption:

• Community consumption grows an average of 4.7% (2008: 5.23 kg to 2018: 8.13 kg per capita)

• Consumption grew an average of 5.7% (2008: 1.24 million tons to 2018: 2.12 million tons)

• However, the average TPT import growth which reached 10.4% caused the consumption growth of the people to be enjoyed only by imported products and reduced the market share of local products in the domestic market.

• So that the utilization of production in semester 1 of 2019 for fiber producers is only 55%, 50% yarn, 40% fabric and even garment, down to 70% because local producers are being attacked by imported apparel through e-commerce.


4. This condition is caused by the lack of efforts to increase industry competitiveness in the sectors of Energy, Human Resources, Logistics, Banking, Taxation, Technology and so on so that the competitiveness of our TPT products tends to stagnate even though competing countries are increasing. This is reflected in stagnation of export growth that lags behind India, Vietnam and others.


5. On the other hand there is relaxation of excessive import rules so that imported goods flood and damage the TPT industry value chain integration:

• PERMENDAG 64 of 2017 which revises PERMENDAG 85 of 2015 allows API -U to import through the Bonded Logistics Center (PLB). On the other hand, many API-P bulging holders also import.

• IKM import facilities through PLB that should have been re-consolidated for export did not occur so PLB was only a place for imported goods.

• Efforts to impose trade remedies (anti dumping, safeguards and anti subsidies) require a long time without the imposition of Temporary Import Duty.


6. Proposed emergency response policy measures to save the TPT industry through Revised PERMENDAG 64 2017 and removing TPT from PLB (Utilization target increases to above 80%, trade balance of USD 5 billion in 2020):

• Stop issuing recommendations and import licenses until a revised PERMENDAG 64 2017.

• Goods that can already be produced in Indonesia (HS 52, 54-63) can only be imported by producers (API-P) as raw materials that cannot be traded with a limited amount (quota) and issued from all types of Bonded Logistics Centers (PLB) ) except for cotton (HS 5201). Whereas those that cannot be produced (HS 50,51.53) can be given permission for API-U through PLB after the Surveyor Verification is carried out at the port of origin of goods loading (avoiding runaway HS, under invoice and volume).

• API-P permits need recommendations to be transparent by attaching payment of electricity bills and BPJS to avoid scamming API-P and importation done outside the PLB.

* Tightening of imports will not affect export performance because raw materials for export have been facilitated by the Ministry of Finance through the Bonded Zone (KB) and the Ease of Importation of Export Purposes (KITE).


7. Proposed medium-term policy measures, industry recovery and improving the trade balance through import substitution and pro-domestic product trade policies (utilization target is above 95% and the TPT trade balance returns to USD 7 billion so as to encourage new investment in 2022):

• Imposing temporary safeguards for 3 years from upstream to downstream with the amount of import duty that ensures the domestic industry can recover and be healthy so that it can regain control of the domestic market along with improvements to improve competitiveness.

• Fiscal incentives for companies that use domestic fiber and yarn raw materials.

• Local Export Destination (KLTE) as a counterweight to KITE to encourage exporters to use domestic raw materials.

• Improvement of gas prices to USD 6 / MMBTU in accordance with PERPRES 40 of 2016 (Refusing PT. PGN to raise prices to above USD 10 / MMBTU per October 2019).

• Settlement of taxation issues (Bukper) so that fair actions be taken between actors who misuse invoices and producers who commit administrative errors.

• Industrial machinery revitalization and modernization program to increase industrial productivity and competitiveness.


8. Proposed Long-term policy steps, increasing competitiveness to drive sustainable exports increase (Performance targets per year: investment growing 30%, exports growing 15% per year, trade balance above USD 15 billion)

• Provision of raw materials in the form of paraxylene production by activating TPPI Tuban and increasing the production of Purified Terepthelate Acid (PTA) by activating PTA production at PT. Asia Pacific Fiber.

• Improving the quality of PLN services to avoid trip / blackouts and to eliminate the coefficient of peak loads or discounts on electricity usage at night until morning for industries that operate 24 hours.

• Determination of the banking sector portfolio to the TPT sector as a strategic industry absorbing employment and generating foreign exchange.

• Acceleration of tax refunds, tax refunds can come out after there is a PEB and manivest (Ocean BL).

• Wage systems are based on increasing worker productivity and improving labor regulations to reduce the burden on industries operating 24 hours (flexibility of working hours on red dates and Joint leave).

• Construction of the "Textile Park" as a place for TPT industry clusters that are integrated from upstream to downstream along with its supporters such as integrated waste treatment, energy supply, training ground for human resources and so on to overcome the high logistics costs.



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