JAKARTA — A flood of Chinese products into Indonesia has hit local manufacturers hard, prompting the government to look for ways to placate domestic producers while avoiding angering the country’s biggest trading partner.
Garment makers have appealed for help as they lose market share to low-cost apparel and textiles from China. A surge of products bought online has added to the problem.
A protest by workers in Jakarta prompted Indonesian Minister of Trade Zulkifli Hasan to announce in July that the government will impose import tariffs of up to 200 percent on some products from China, particularly textiles, clothing, footwear, electronics, ceramics and cosmetics, to try to protect local businesses and prevent layoffs.
JUGGLING ACT Workers inspect clothing products at Asnur Konveksi, a garment manufacturer in Bandung, West Java province, Indonesia, on July 11, 2024. The Indonesian government is playing a balancing act in trying to placate local businesses and China, its largest trading partner. AP PHOTO
“The United States can impose a 200 percent tariff on imported ceramics or clothes, so we can do it as well,” Zulkifli said, to ensure micro, small and medium enterprises and industries “survive and thrive.”
But China is Indonesia’s largest trading partner, with two-way trade exceeding $127 billion in 2023. Imposing higher tariffs could prompt Chinese manufacturers to invest in more in factories in Indonesia, but could also backfire, leading Beijing to retaliate. As a result, the government announced in July that it was setting up a task force to monitor and handle problems related to certain imports.
From January to July 2024, at least 12 textile factories shut down operations, causing more than 12,000 workers to lose their jobs, according to the Nusantara Trade Union Confederation.
In Bandung district, in Indonesia’s West Java province, imports of Chinese products have left thousands of workers idle and without regular incomes, said Neng Wati, a manager at manufacturing company Asnur Konveksi.
“Now they take turns. The number of workers stays the same, but the work is divided up and not all get some. Some of them have been off for two weeks, some of them haven’t gotten work for a month,” Wati said.
That is a hard blow coming after the slow days of the Covid-19 pandemic, when many workers were shifted to e-commerce to make ends meet, said Nandi Herdiaman, head of a local organization of small and medium entrepreneurs. Only 60 percent of the 8,000 members of the association kept working after the pandemic.
The biggest challenge is cheap imports from China. In the past two months, output from home-based industries has fallen by 70 percent, the industry organization says.
The uptick in imports of Chinese products is partly seen as the result of trade friction between the US and China, which has led to increased American tariffs on Chinese goods. But it also reflects rising trade within Asia as the region implements various free trade pacts, as well as weakening demand in Western markets for Chinese exports.
In December, Indonesia issued a regulation to tighten monitoring of more than 3,000 imported goods, including food ingredients, electronics and chemicals. But the regulation was reversed after domestic industry said it hindered the flow of imported materials needed for local production, and the government began considering steep tariff hikes instead.
While smaller manufacturers have suffered the greatest setbacks, big factories are also hurting.
Jany Suhertan, managing director of PT Eksonindo Multi Product Industry, which makes clothing and accessories like backpacks and handbags in West Java, wants the government to raise import duties on finished goods from China but not on raw materials needed to make products in Indonesia.
Nearly half of the materials his company uses are from China.
“I don’t agree with imposing [higher tariffs] on raw products, since the government should protect the supply chain. If it is not secure, it will impact production,” Suhertan said.
Be the first to comment