China Sewing Up Indonesian Textile Markets

While Indonesian textile producers have been lamenting the industry’s lack of preparedness for a region-wide free-trade agreement with China that begins on New Year’s Day, Chinese textile producers have been quietly securing space in the largest textile markets in Jakarta and Surabaya for their imports. Ade Sudrajat, vice chairman of the Indonesian Textile Association (API), said on Thursday that the Chinese producers have also launched a quiet campaign to recruit more traders, distributors and importers as they prepare to flood Indonesia with duty-free garments. Ade told reporters that Chinese producers plan to convert an entire floor of the Tanah Abang market in Central Jakarta, the largest textile market in Southeast Asia, for Chinese products only. The producers, he said, have offered support and funding for local traders willing to sell imported Chinese garments. Ade said Chinese producers were also targeting Surabaya’s Turi Market. “[The traders] will function as importers and sellers, as well as distributors,” Ade said. “This has been a common practice of China in marketing textile products. They did the same thing in Dubai to market their products in the Middle East.” China signed a free-trade agreement with the 10 members of the Association of Southeast Asian Nations, including Indonesia, in November 2002, with broader terms of the agreement set to go into affect on Jan. 1. Under the deal, the signatories agreed to scrap import duties on manufactured goods such as steel, textiles and footwear. Tariffs in other sectors, such as food and beverages and electronic goods, will be gradually reduced to zero by 2018. Ernovian Ismy, secretary general of the API, was quoted by local media as saying 75 percent of textiles sold at Tanah Abang were imported, and the vast majority came from China. Indonesia has already suffered heavy trade deficits with China in recent years in textiles and garments but the worst was yet to come, he said. Citing data from the Central Statistics Agency (BPS), he said bilateral trade in textiles and garments showed a trade balance of $860 million in favor of China. With illegal Chinese goods already flooding the country’s textile market, some say that the industry is doomed once the pact takes full effect.

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