The Indonesian Filament Fiber and Yarn Association (APSyFI) said that Indonesia's textile trade balance with South Korea would remain in deficit, despite the Indonesia-Korea Comprehensive Economic Partnership Agreement (IK-CEPA) next year. Secretary General of APSyFI Redma Gita Wirawasta said the trade balance deficit persisted even though domestic garment exporters had received the elimination of tariff posts reaching 95 percent on textile products. The abolition of tariff posts which reached 95 percent of textile products came from the Asean-Korea Free Trade Area (AKFTA) commitment.
"Starting from HS 50 to 63, there are already many zero tariff posts, around 95 percent of them have been freed up, but the exports are not too aggressive because we are substitutes," said Redma by telephone, Tuesday (7/12/2021).
Redma said that the majority of the domestic textile industry exports raw materials such as spun yarn which is later processed into cloth by the textile industry in the Ginseng Country. Finished goods processed in South Korea, said Redma, are re-imported to Indonesia to meet domestic market demand and some are re-exported to the United States and Europe.
“Korean garment factories that export orientation not to Korea anymore are made in Indonesia which are exported to the United States and Europe, but the factories are owned by Koreans. Internal supplies are met from factories in Vietnam, China and Bangladesh," he said.
Thus, he said the implementation of the IK-CEPA would not have a significant effect on boosting the export performance of the domestic textile industry. The market structure created by South Korea forced Indonesia to export raw materials.
“It will not affect [IK-CEPA], we are a bit worried since AKFTA our textile industry is in deficit because what we export there is yarn we import fabric. The price of cloth is more expensive than yarn, the volume is even bigger," he said.
Citing data from the Central Statistics Agency (BPS) processed by the trade authority, Indonesia's trade balance with South Korea from January to September 2021 experienced a deficit of US$254.1 million.
The balance of deficit came from the realization of imports which were higher than exports. The value of Indonesia's imports from South Korea reached US$1.56 billion. On the other hand, the export value was in the position of US$1.31 billion. Meanwhile, the total trade between the two countries from January to September 2021 has reached US$ 2.88 billion, an increase of 29.6 percent when compared to the same period last year at US$ 2.22 billion.
