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TPP 'yarn-forward' may be hurdle for Indonesian textiles
âIf thereâs one thing that we need to watch out when we join the Trans-Pacific Partnership [TPP], thatâs the yarn-forward clause,â said Benny Soetrisno
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'If there's one thing that we need to watch out when we join the Trans-Pacific Partnership [TPP], that's the yarn-forward clause,' said Benny Soetrisno.
Speaking in a recent press conference, the Indonesian Textile Association's (API) advisory board chairman said that while the US-led TPP would likely bring more benefits than harm to the local textile industry, the country had to boost the industry's readiness at all stages of the manufacturing process.
'There's a provision in the TPP that will cut tariffs only for garment products made using materials sourced from the member countries,' he said.
The US-led economic partnership, once implemented, is set to apply a 'yarn-forward' rule of origin that requires textile and apparel products made using TPP members' yarns and fabrics to qualify for zero-tariff in trades among the member countries.
The clause will also certainly apply to Indonesia if it eventually joins the so-called 21st century economic partnership.
The TPP currently has 12 signatory countries, namely Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US. All the 12 signatories are now in the process of ratifying the TPP in their respective countries, expected to take about two years.
President Joko 'Jokowi' Widodo said last October during his state visit to the US that Indonesia intended to join the TPP and in his recent visit to the US-ASEAN Summit, he said that Indonesia was now calculating both the benefits and drawbacks of the partnership.
Indonesia's textile industry is considered to be the sector that will gain most should the country join the TPP in the coming years.
The Industry Ministry's director for textiles, leather, footwear and various industries, Muhdori, said that the textile industry was ready for the partnership as it was already structured from its upstream to downstream.
Meanwhile, the Industry Ministry's data show that in 2014, Indonesia still imported a total of US$8.6 billion textiles in the form of fiber, yarn, fabric, garments, tapestry and other textile products, with a big chunk estimated to come from China, which is not a TPP member.
Vietnam, which is one of the TPP signatories, has previously raised concerns about the yarn-forward rule of origin as it still imports some types of fabric from China.
API chairman Ade Sudrajat argued that he was still upbeat that joining the TPP would benefit the country's textile industry, but support from the government to develop the whole process of garment manufacturing was needed.
In terms of workers, Ade said the government could, for example, help textile companies build workers' dormitories next to production plants.
'We want the government to subsidize housing for workers at garment factories so that we can recruit workers from other districts outside where the production plants are based,' he said.
While a number of business sectors have been reportedly making lay-offs to improve business efficiency, many garment manufacturers have experienced workforce shortages to support expansion.
Garment manufacturers in Surakarta, Boyolali and Wonogiri, are now still looking for more workers although they have already recruited around 1,000 new workers.
Investment Coordinating Board (BKPM) head Franky Sibarani said previously that his office would request companies to report any layoff plans so that it could channel affected workers to other business sectors that needed more workers.
The API has estimated that textile exports will surge significantly, particularly if the country joins the TPP.
Indonesia's textile exports increased from $8.6 billion in 2005 to $12.7 billion in 2014, well behind the performance of Vietnam, which booked $26.2 billion from textile exports in 2014 from only $5.3 billion in 2011.
Ade said that his association estimated that the TPP could more than double Indonesia's textile exports in a decade as the US is one of its major markets.
