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Indonesia TPT Manufacturs Worry IB-APTA

Jakarta, March 17, 2022

Garment Factory

Textile and Textile Products (TPT) manufacturers demdands government to pay close attention to the local market of the Indonesian textile industry in Cooperation with Bangladesh through the so-called IB-PTA (Indonesia-Bangladesh Preferential Trade Agreement) considering that the textile industry in Indonesia is very important for national economy. TPT is one of the biggest foreign exchange earners and also as a major employment due to the labor-intensive nature of the industry, especially in the apparel sector.

The entry of Bangladeshi garments into Indonesia local market will further put domestic market-oriented companies under pressure to compete due to the fact that Bangladesh Garments are currently the second strongest after China. Business players believe that Indonesia will lose to compete with Bangladesh because it still loses in many ways. From industrial gas prices, for example, Bangladesh applies a price of US$3.22 per MMBTU for textile players.

In addition, the electricity tariff is also flat at US$ 0.105/kWh. Bangladesh is also the second largest apparel exporter in the world with a value as of 2021 of $39.14 billion. Meanwhile, industrial gas prices in Indonesia range from US$11-12 per MMBTU, and electricity rates are not flat with more expensive curfews. Of course, with this condition, the domestic market which is starting to get excited could be threatened by the approval of the Indonesia-Bangladesh Preferential Trade Agreement (IB-PTA) considering that a number of textile products were also discussed in the negotiations in the agreement.

According to Indef, the free trade of the domestic textile industry with Bangladesh must be responded quickly by the government with a series of policies to support competitiveness because it must be supported by an equal level of playing field so as not to harm the local industry. Researcher at Indef's Center for Industry, Trade and Investment Ahmad Heri Firdaus said that in order to be competitive, government should provide incentives to intervene in the production cost structure so as to pursue the competitive advantage of Bangladeshi textiles.

A number of factors in the production cost structure such as industrial gas, electricity, worker wages, and ease of logistics must be taken into account by government, both in negotiating agreements and in formulating incentives. Heri believes textile industry will remain one of the prima donnas among other manufacturing sectors. "We do not close ourselves off to compete with other countries, but local industries must be considered," he continued.