The Indonesian textile and textile products industry appears to still be shambled by the adverse impact of the Covid-19 pandemic. The industry began to suffer the impact of the pandemic since the second quarter of 2020 as factory utilization in the sector plummeted 30% due to large-scale social restrictions (PSBB) policies and decreased consumers’ purchasing power. The utilization of production capacity started to increase to 50% in the third quarter and 70% in the third quarter of 2020. Although the purchasing power of the people had not recovered yet, but tightened import permits could increase production.
Since the first quarter of 2021, the utilization has been improving to reach the level of 80%. However, local industry faces another challenge in the form of illegal imported fabrics flooding and the rise in imported apparel sold through online stores or e-commerce.
At the same time, the price of world crude oil is increasing to make the ra materials for textiles such as paraxylene (PX), purified terephtalic acid (PTA), methyl ethylene glycol (MEG), rayon pulp, and cotton surging. This situation certainly increases the price of yarn, fabric, and finished clothes produced by Indonesian textile and textile products manufacturers.
Actually, Indonesian manufacturers are still able to export textiles in several categories. However, the export demand has yet to recover to the level in periods before the pandemic. For now, the main issue is the widespread import of cheap apparel products because it directly has a negative impact on small and medium-sized industry producing the apparels. Meanwhile, they are in the forefront of downstream sector of textile and textile products value chain in the country. Cheap imported apparel is currently piled up in Indonesian warehouses and is ready for circulation through online platforms.
The Covid-19 pandemic had made it difficult for many domestic manufacturers to sell products to various places such as malls or other shopping centers. Some countries that are export destinations also quarantine the area so that it cannot be accessed. Even so, thanks to product diversification some companies can still survive in the midst of various difficulties to date.
Textile and textile products industry actually does not require a lot of incentives from the government. Nevertheless, the industry association called for special treatment in the form of domestic market guarantees. In this case, the government is urged to immediately implement safeguards or security measures against the rise of imported textile products, especially apparel. Because, in addition to small and medium manufacturers, other textile businesses will definitely be harmed by the import influxes. The industry ask for a trade policy that is pro-domestic industry, not a trade policy that is pro imported goods.
Responding to the appeal, the government has been implementing safeguard as trade remedy measures to protect local industry from the import influx. The latest measure is to levy safeguard duties – ranging from US$0.44‑US$11.29 per item – on articles of apparel/clothing accessories from China, Bangladesh, Singapore and Vietnam, four countries that each provide more than 3% of the total of such imports. The safeguard measures follows an investigation into Bangladesh’s apparel exports to Indonesia for the period 2017‑2019.
In specific terms, the levy will apply to such items as casual and formal upper garments, lower garments, suits, dresses and ensembles, outerwear, clothing accessories, babies’ garments, neckwear and headwear. The tariffs will be implemented in three separate tranches, with the rates for the second and third impositions will be lower.