TEMPO.CO, Jakarta - The Ministry of Trade should not be too hasty in implementing the new regulation on the import of raw materials for textiles. Without careful preparations, the decision to allow imports could cause even more problems for the government. An oversupply of raw materials would mean the downstream industry would find it difficult to overcome its stagnation.
Ministry of Trade Regulation No. 64/2017 allows not only producers but also holders of general importer identity numbers (API-U) to import cloth, thread and fibers. These raw materials can be resold to meet requirements. The problem is, there is no guarantee that these imports will only be sold to small and medium-sized businesses which is what the government is aiming for.
Another difficulty is ensuring that the quantity of import of raw materials matches demand. This figure is important and should be used as a guideline to stop an excess of imports. However, on the ground, the Ministry of Trade will find it difficult to calculate the requirements of small and medium-sized textile companies.
Therefore, to stop the spread of these goods, API-U holders should draw up contracts with small and medium-sized textile businesses before any import. These businesses should only be able to obtain raw materials through a logistical center they are contractually bound to. Ideally, this mechanism would make it easier to keep records and stop wholesale imports.
Moreover, the government must keep a careful eye on surveyor agencies, as they will check the names and addresses of importers, the type and quantity of goods, and the schedule and destination of shipping. These surveyors should verify that the imported goods are in line with the requirements of small and medium-sized companies.
Unfortunately, the Ministry of Trade regulation does not clearly map out this process, even though surveyors should ensure that the raw materials imported by the holders of producer importer identity numbers (API-P) are only for their own use, and do not exceed their production capacity.
These loopholes should be taken into consideration so that implementation on the ground is properly done and does not raise suspicions. After all, this import regulation came about after the government banned all kinds of wholesale imports. The Indonesian Textile Association, one of the driving forces behind the new regulation, claims that imports now must be allowed because the small and medium-scale textile sector is having problems obtaining raw materials. The fact is that ready-made clothing companies can still absorb all domestic raw materials. The Industry Ministry has received no complaints from the small and medium-sized sector since wholesale imports were banned.
The decision by Finance Minister Sri Mulyani to ban wholesale imports is correct. For many years, this practice has allowed the entry of smuggled textiles. This not only causes losses to the state: the import of rolls of fabric damages the domestic textile industry. Total losses last year are thought to have reached Rp30 trillion.
The wholesale import ban has been able to help domestic producers of raw materials. Domestic sales of local thread and fiber have soared by 30 percent. Factory utilization has risen by between five and 10 percent. The weaving and knitting sector has also been revitalized. It is no surprise, then, that the government's decision to allow imports has caused concerns in raw materials factories.
The Ministry of Trade must patch the weaknesses in the regulation. One way would be to ensure that supply matches demand. The Industry Ministry proposal that imports are only allowed for raw materials that cannot be produced domestically-such as silk thread and gauze-deserves support.
The government should keep a close eye on the import of textiles. This decision to allow imports must not only benefit a small number of traders and importers who have made money from wholesale imports.
