Indonesia Rolls Out Policy to Protect Domestic Cotton Sector

Core Viewpoint - The Indonesian government has implemented a new tariff policy to protect domestic cotton woven fabric producers from increased imports, following an investigation that highlighted the negative impact of these imports on the local textile sector [1][2]. Group 1: Tariff Policy Details - The new tariff, known as the Bea Masuk Tindakan Pengmanan (BMTP) duty, will be added to existing import duties and will exempt imports from 122 developing countries that are members of the World Trade Organization [2]. - The policy will be in effect for three years, with a declining tariff structure: the first year will see rates between Rp3,000 ($0.18) and Rp3,300 per meter, the second year will lower rates to Rp2,800-Rp3,100, and the final year will further reduce rates to Rp2,600-Rp2,900 [3]. Group 2: Industry Overview - The textile and apparel industry is a significant manufacturing sector in Indonesia, benefiting from a strong domestic market and a well-established value chain from fiber production to finished garments [4]. - Indonesia ranks 13th among textile-exporting countries, holding a 1.66 percent share of global textile exports valued at $13.4 billion in 2023 [5]. - Domestic demand for textiles accounts for approximately 30 percent of production, driven by factors such as online retail growth, increased purchasing power in urban areas, and rapid adoption of fashion trends [6]. Group 3: Demographic Influence - Indonesia's large Muslim population, which constitutes about 12 percent of the world's Muslims, significantly boosts domestic textile demand, with around 80 percent of Muslim apparel production aimed at local consumption [7]. Group 4: Import Regulations - Importers benefiting from exemptions must provide a certificate of origin for cotton woven fabric imports from eligible countries; otherwise, the imports will be subject to the new duty [8].