Poor Regulations and the Collapse of the Textile Industry
Monday, July 15, 2024
There is another wave of layoffs in the textile industry. This is the result of poor coordination between ministries when drawing up regulations.
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THE collapse in the domestic textile industry resulting in a wave of layoffs is the result of disarray in government regulations. Without comprehensive improvements, other industry sectors could suffer the same fate.
These mass layoffs have occurred in the textile industry as well as in its derivative products sector. According to the Nusantara Confederation of Labor Unions, 50,000 people have been laid off in the textile industry. Most recently, 11,000 workers from six companies were made redundant. Constant changes to import policies are blamed for these job losses.
Case in point, the Trade Ministry Regulation on Import Policy has been changed three times. Initially, it was Regulation No. 36/3023, then No. 3/3024, then No. 7/3024, and finally No. 8/3024. These changes happened at intervals of only three months. This is a sign of the lack of coordination between ministries, the failure to accommodate the aspirations of the people and the government’s inability in determining priorities.
Trade Ministry Regulation No. 36/2023 was changed because it was opposed by many industries as it caused problems obtaining raw chemical materials. Regulation No. 3/2024 then appeared to accommodate this, but in turn triggered protests from people returning from overseas as well as migrant workers. Then Regulation No. 7/2024 met with more protests from importers because it made it difficult to import goods. Now, Ministry Regulation No. 8/2024 has been condemned by the textile and derivative products sectors because it has led to a flood of imported clothes.
One fatal article in Regulation No. 8/2024 is the removal of technical considerations for clothing imports. Importers are now free to import ready-made clothes from overseas by simply providing an import plan for one year. There are no longer any requirements relating to warehouse capacity, sales, or capital.
The lack of clarity in this regulation has led to a decline in operational activities in factories. According to the Indonesia Textile Association, utilization of textile and clothing factories is now down to less than 60 percent of capacity. Worst affected is the demand for yarn, which is down to only 40 percent.
Given this state of affairs, the government should have sounded the alarm bell. There is something amiss with our textile industry. If other countries such as China can export garments using dumping practices, the government should have anticipated this by imposing anti-dumping import duties and security measures. It turns out that the anti-dumping duty regulation for fabric has not been extended, even though this was requested by the industry back in 2022.
It is not possible for the government to make everybody happy when drawing up policy. But the government could minimize the pain by prioritizing particular industry sectors that employ large number of labor. For example, the textile and textile products industry—along with the food and beverage sector—which employs 3.6 million full-time workers.
Jokowi’s government has to start making improvements to these chaotic import regulations. Without swift action, the government will be creating a time bomb that could wreck the national economy.
