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Indonesian government plans to give incentives to textile industry

In its resolve to encourage exports and competitiveness in the global marketplace, the Indonesian government has planned to give different kinds of incentives to the country’s textile industry. Thsi was revealed by Harjanto, the ministry’s former director general of international industrial co-operation. He also said that claims officials are exploring the idea of applying energy cost refunds, subsidising electricity bills for manufacturers who want to export textile products.

The ministry is also in the process of developing plans to revoke goods and services tax (GST) paid by manufacturers purchasing raw materials within Indonesia where they are making products for export. The GST currently levied at 10 per cent on such textiles. He said that the whole idea was to give an energy refund to companies that want to commit export…and to support the use of domestic raw material [for textile production], the concept is about (revoking) GST.

Currently, companies exporting their textile products can receive a reimbursement, but it takes a year before the money is repaid. The practice depletes industry capital to sustain production – a GST exemption would remove this problem. It would also, he claims, encourage manufacturers to source raw materials within Indonesia – under the reimbursement system, manufacturers will not have an interest to export and prefer to import [inputs].

The current ministry director general of chemical, textile and other industries Achmad Sigit Dwiwahjono added that the government also plans to exempt purchases of manufacturing equipment by Indonesian textile product exporters from GST. The export of textiles and textile products from Indonesia declined by 3.6 per cent to US$12.28bn in 2015 from US$12.74bn in 2014, while the country intends to improve the export to US$12.5bn in 2016, according to industry figures.

The textile sector would like the government to act fast with its incentive schemes. Anies Soengkar, chairman of the Indonesian Textile Association (API – Asosiasi Pertekstilan Indonesia) branch Pekalongan, Central Java however said that officials have been mulling these ideas since 2014. The API has proposed that the government reduces electricity tariffs charged to the industry by 30 per cent. By August this year, the electricity tariff charged to the textile industry was Indonesian Rupiah IDR1,593.78/kWh (US$0.12 cents).

 
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