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Upstream Textile Producer Complained About Uncontrolled Textile Import

Jakarta Agustus 2019

weavingUpstream Textile Industry

Upstream textile industry producing fiber and filament yarn complains about the occurrence of imported fabrics as raw material for the uncontrolled garment industry, causing installed capacity utilization to not operate full capacity. The flood of fabric imports greatly disrupts the company's performance because the company's products are not maximally absorbed by yarn manufacturers and fabric makers. The company considers that the PLB policy that allows API-U holders to import fabrics as raw material for IKM-TPT is the trigger for the current flood of uncontrolled imports.

According to one of the manufacturers in the upstream industry, fabrics face low absorption below 50% and the entire industry absorbs only 60-70%. Commodities that are not absorbed become unused items in the storage warehouse. "Instead of production piling up in warehouses, entrepreneurs are forced to produce production," he said. For this reason, he hopes the government can curb various imported products so that it can provide opportunities for domestic industries to produce. This does not mean that it is anti-import but should not kill domestic companies. Imports should only be used to meet shortages and for products that have not been produced domestically.

The flood of fabrics in the domestic market with prices below the market accompanied by the practice of stockpiling of imports made many fiber companies and filament yarn forced to reduce production. The nature of the upstream textile industry is a bit different like PTA for making textile products such as polyester and polyethylene thephthalate (PET). For this type of machine must continue to operate nonstop for 24 hours. The quality of fiber and yarn produced as raw material for the manufacture of garment and knit industrial fabrics can go down when the engine has stopped and even costs can be frozen if the engine does not operate or there is a reduction in production.

The flood of imported fabrics was also complained of by cloth manufacturers such as in West Java because they could not compete with imported fabrics. As a result, many fabric manufacturers reduce production or even close their businesses because their customers are turning to imported products that are cheaper. They considered that the flood of imported fabrics was a result of the PLB regulations that allowed the import of fabrics by API-U holders.

With the current domestic market conditions, the upstream textile industry is difficult to invest and increase production capacity even though the budget is available. For this reason, the incentives given in super deductible taxes of up to 300% through Government Regulation (PP) No. 45 of 2019 for companies that invest / expand or pioneer are less attractive for textile companies in the upstream. They considered that it was better for the government to control imports so that the business would run well rather than fiscal incentives but many companies did reduce production.

Actually, when referring to the explanation from the Ministry of Trade and the Ministry of Industry related to the import of fabric through the PLB, it should not interfere with the domestic industry. This is because this limited facility is only intended for raw materials of IKM-TPT which have difficulty in making raw materials from large companies both in terms of minimum quantity and payment problems.

Although at this time many parties are requesting that this import regulation return to the old regulations where only API-P holders are allowed to import cloth but not a few who request that this system be maintained because of its good intentions. Parties who want to maintain this provision ask the government not to rush to revise it so that if there is a weakness in its implementation, only certain parts of the repairs will be carried out. This provision is proven to reduce the time of importation and provide flexibility for the domestic textile industry to make payments at the time of purchase.

With this pro-cons, it seems that the right policy formulation needs to involve all policy makers and entrepreneurs to provide certainty for investors to grow their businesses, considering that each industrial sector has different needs (Admin)