A fishing boat sails near the New Priok Container Terminal One (NPCT1) in Cilincing, Jakarta, on Aug. 20, 2024.Indonesia enjoyed a US$470-million trade surplus in July. - Photo: Antara
JAKARTA: The government has proposed turning illegally imported goods into industrial fuel for factories due to budget constraints that prevent it from destroying the contraband, but the idea has drawn a sharp rebuke from critics and industrialists, who say such a move could be burdensome rather than beneficial.
Trade Ministry Domestic Trade Director General Moga Simatupang came up with the idea of using the confiscated products, including textiles and machinery, as a source of energy for factories to save the government the cost of having to move and destroy them.
Since its establishment last month, the illegal goods task force has seized Rp 106.2 billion (US$6.8 million) worth of illegally imported goods, including thousands of tools, such as grinders and drills, electronic gadgets, plastic products, furniture, textiles, footwear, alcoholic beverages and even a car washing machine valued at Rp 15 billion.
Speaking to The Jakarta Post, Fajar Budiono, secretary-general of the Indonesian Olefin, Aromatic and Plastic Industry Association (Inaplas), opposed the idea, calling it impracticable for the local plastics industry.
While plastics could technically be converted into fuel through a process called pyrolysis, it was not a common practice within the domestic plastics industry, Fajar explained.
“This is a rather strange and unclear idea. Few in our industry have the machinery required to convert plastics into energy,” he said on Thursday (Aug 22).
Moreover, receiving the goods, even for free, could burden businesses due to the high costs associated with separating plastic from other materials, making it difficult to repurpose these goods.
“No, if we are told to [eradicate] these goods. It will cost us more money,” he said.
“Besides, they have to chop it up before giving it to the industry, in order to prevent it being misused, such as being resold.”
Moga, who was still serving as the ministry’s consumer protection and trade order director general when he floated the idea earlier this month, did not specify which industrial sectors would be eligible for the transfer of the seized contraband.
It would cost the government money to chop up the goods confiscated by its own task force, he said on Aug. 6, as quoted by Bisnis.
According to Moga, the imported used clothing could help industries as a feedstock for fuel.
Industry Ministry spokesman Febri Hendri Antoni Arif approved of the task force's plan for a “transparent provision” of the textile goods as fuel for industrial operations, Kompas reported on Aug 11.
Danang Girindrawardana, executive director of the Indonesian Textile Association (API), said the upstream textile industry was indeed in need of fuel but textiles had never been considered a viable option.
“Our industry typically relies on gas and coal [...] for fuel. Replacing these with textiles would require special technology, and we’re unsure how much product would be needed or the amount of heat that could be generated,” Danang told the Post on Thursday.
Around 10 tonnes of seized textiles could only supply energy for about a month if the industry would like to try it, according to his calculations, but this only raised questions about the sustainability of the idea.
On the other hand, he suggested that some of the raw illegal goods, like fabrics, could be used as raw material for small industries, with strict controls.
“But this could only be done as a temporary solution,” he warned.
“Illegal imports must be stopped, and using seized goods as a continuous solution could disrupt the market and fail to curb illegal imports,” he added.
The Small and Medium Enterprises (SME) Ministry has estimated the state losses due to illegal textile imports at Rp 6.2 trillion a year.
Illegal imports could lead to the loss of 67,000 jobs in the textile industry, with an annual income of Rp 2 trillion and a potential GDP loss of Rp 11.83 trillion annually, the ministry's acting deputy for SMEs, Temmy Satya Permana, said on Aug. 6, as quoted by Antara.
The head of the Indonesian Fiber and Filament Yarn Producers Association Redma Gita Wirawasta similarly said on Thursday that the industry could not get on board with the idea, as it lacked the ability to process confiscated illegal goods into fuel.
“We recommend shredding these textile goods back into raw materials.
"Only then can they be effectively used by the industry,” said Redma.
“Given the limited budget of the task force, they can try to auction it to some companies within the sector for recycling into industrial raw material, with the proceeds supporting the task force’s operations.”
‘Legalising illegal imports’
Experts say the plan to repurpose confiscated illegal goods as industrial fuel and handing it out to factories highlighted the government’s struggle to address the influx of such goods.
While he opined that repurposing the confiscated goods could prevent waste, Center for Indonesian Policy Studies (CIPS) senior fellow Krisna Gupta told the Post on Friday that handing them over to private-sector companies could be tantamount to “legalising illegal imports”.
“Allowing private entities to utilise these goods is akin to permitting illegal imports, flooding the domestic market,” Krisna argued.
He also raised concerns about a lack of transparency in the process, questioning which private entities would be eligible to receive the seized goods and whether the original buyers would be involved.
Moreover, this highlighted the fact that the task force lacked the necessary material and legal resources to effectively combat illegal imports, “such as the absence of a follow-up mechanism [...] for the treatment of the illegal goods they currently have.”
“The [government] must revise the task force’s structure to effectively address these issues,” added Krisna.
Center of Economic and Law Studies (Celios) executive director Bhima Yudistira labelled the policy “counterproductive and peculiar,” warning it could disrupt supply chains and harm legal importers if confiscated illegal goods were handed over to domestic industries.
In most countries, seized illegal goods are all destroyed, he said, and the entry of illegal goods is often blocked through coordination with the countries of origin.
Bhima questioned the logic behind distributing these goods to local businesses, warning the government to be more cautious in drafting policies.
“Why is there a control of illegal goods if they are to be distributed to domestic players?” - The Jakarta Post/ANN
