Indonesia : Inefficient Textile Units Alerted for Tougher Competition

At the end of the next year when the global quota system is removed, the inefficient textile and garment industry of Indonesia has been told to get its act together in order to survive tougher competition in the export market.

The current system of quotas, imposed by the U.S., the European Union and Canada in the mid-1970s against developing countries, mostly in Asia, will be removed as part of a World Trade Organization liberalization drive. This will allow efficient producers to dominate the world''s more than US$500 billion textile and garment market.

The quota system limits the amount that a producing country can export to the developed countries. In actual practice, it meant that efficient producers, from a country such as China for example, could only export a relatively small percentage of what it was capable of producing, thereby allowing other more inefficient countries to sell similar amounts to meet worldwide demand. While some analysts said that efficient producers from China are set to gain most from the liberalization drive, there are concerns that textile makers from Indonesia which have been struggling with various problems like the lack of financing to upgrade old machinery and lingering labor conflict could face difficulties to win competition against more efficient regional neighbors.

Textile and garments have been one of the main non-oil and gas export products. The sector also employs millions of people. The government, however, has not shown a great deal of concern about the threat. "I''ve been asked several times, ''Will our textile industry face a slump?''," Minister of Industry and Trade Rini Soewandi said in a meeting with the government WTO negotiation team, last week. "I have always replied that there will never be a ''sunset'' in our textile industry as we are a country of 220 million people, how could the industry die?" she wondered.

The director general of foreign trade at the Ministry of Industry and Trade, Sudar SA told that the government had not yet formulated any special plans to help textile and garments makers deal with the tougher export competition. Asked whether upgrading its machinery would help boost the efficiency and productivity of the textile sector, Sunjoto claimed that machinery was only a small part of the larger problem. "What is more important to be addressed first is fundamental issues like labor laws, cost structure, taxation laws and investment laws," he said. "Once those matters are settled, we can talk about machinery and all."