Losing shine as demand sinks<\/p>\n
Hendarsyah Tarmizi and Blontank Poer, The Jakarta Post, Jakarta<\/p>\n
The textile industry, once considered the economy's most
\npromising sector, is losing its shine. Low demand, internal
\nfinancial problems and a lack of efficiency have left the
\nindustry in a difficult position.<\/p>\n
The industry has been a major engine of Indonesia's economic
\ngrowth for the past several years. As one of the country's major
\nforeign exchange earners, the textile industry has also played a
\ncritical role in providing jobs for millions of Indonesian
\nworkers.<\/p>\n
However, recent developments have brought an end to the
\nindustry's charmed life. Although the sector remains the largest
\ncontributor to the country's non-oil exports, its leading role in
\nraising foreign exchange is diminishing.<\/p>\n
Low overseas demand, internal financial problems, industrial
\ninefficiency, and non-economic factors such as security problems
\nand increased labor disputes have made the climate difficult for
\nthe industry's major players.<\/p>\n
\"I have run out of words to describe how severe the situation
\nbeing experienced by Indonesian textile and garment producers
\nis,\" said Ade Sudrajat, the secretary general of the West Java-
\nbased Association of Indonesian Textile Producers (APTI).<\/p>\n
Ade said that, in such difficult conditions, the textile
\ncompanies in the province had no choice but to lay off workers in
\na bid to keep themselves afloat. The lay-offs are continuing, as
\noverseas demand continues to decline, and at an increasing rate.<\/p>\n
At least 100,000 workers in West Java, one of the country's
\nmajor textile producing centers, have lost their jobs due to poor
\noverseas demand. Lay-offs have also been initiated by textile
\nproducers in such areas as Jakarta, Central Java, East Java and
\nBatam.<\/p>\n
The conditions facing the industry deteriorated further
\nfollowing the Sept. 11 terrorist attacks on the United States.<\/p>\n
Major buyers of textiles and garments reduced their orders out
\nof fear that the terrorist attacks would spread worldwide,
\ncrippling the global economy in the process.<\/p>\n
Textile producers in Central Java are also severely hurt by
\nthe downturn.<\/p>\n
\"Many friends in the textile manufacturing industry are
\nconsidering changing their profession to traders. Becoming a
\ntrader might be more profitable at present as imported products
\nsuch as those from China are much more competitive in the local
\nmarket,\" said Setiawan Santoso, the owner of garment producer PT
\nRodeo.<\/p>\n
According to him, the decline in overseas demand has forced
\nmany garment producers in Central Java to cut production.
\nAlthough some of them are able to survive, most are in a critical
\nsituation.<\/p>\n
Setiawan said that some textile companies had managed to
\nmaintain their activities thanks to the help from larger textile
\nfirms, which sub-contracted part of their orders to smaller
\nfirms. \"But the situation has changed following the terrorist
\nattack against the World Trade Center (WTC) in September last
\nyear. Many buyers have canceled their orders,\" he said.<\/p>\n
Separately, the chairman of the Central Java chapter of the
\nAssociation of Indonesian textile producers (API), Andi Sanang
\nRomawi, said that falling overseas demand was not the only factor
\ncontributing to the local garment producers' difficulties. He
\nsaid that low domestic demand was also part of the problem.<\/p>\n
\"The decline in people's buying power due to the country's
\neconomic crisis remains a major problem in the domestic market,\"
\nsaid Andi, who is also the president of PT Damatex Salatiga.<\/p>\n
According to him, the utilization of the province's textile
\nproduction capacities has dropped to about 60 percent due to the
\nfall in the demand.<\/p>\n
Bambang Priyono, the head of the foreign trade department of
\nthe provincial office of the Ministry of Industry and Trade, said
\nthat many overseas importers had chosen to buy from China,
\nVietnam or Bangladesh because Indonesian textile products were
\ntoo expensive.<\/p>\n
The fall in overseas demand in the aftermath of Sept. 11 has
\nbeen just one of many problems confronting the textiles sector
\nover the past three years.<\/p>\n
The regional financial crisis that spilled over into Indonesia
\nin late 1997 and brought the economy to its lowest point in
\nrecent history, posed severe problems for major Indonesian
\ncompanies, most of whom had raised U.S. dollar-based loans to
\nsupport their operations.<\/p>\n
The sharp drop in the value of the rupiah against the U.S.
\ndollar has almost tripled the rupiah cost of their U.S. dollar
\ndenominated debts.<\/p>\n
Besides facing difficulties in financing their foreign debts,
\ntextile companies have also been lacking the financial support
\nneeded to cope with the surge in prices of imported materials.<\/p>\n
Exports of garments and other related textile products, which
\nreached $6.42 billion in 1996, fell to $5.16 billion in 1997 when
\nproducers started to feel the pinch of the crisis. Exports
\ndeteriorated further and dropped to $4.99 billion in 1998 when
\nthe financial crisis, which had led to the downfall of the
\nauthoritarian leader Soeharto after 30 years in power, reached
\nits peak.<\/p>\n
Exports rose again to $6.8 billion in 1999 thanks to an
\nimprovement in the political situation. The more conducive
\nenvironment the following year encouraged foreign buyers to look
\nmore favorably at Indonesian goods.<\/p>\n
In 2000, exports of textiles and garment products reached a
\nrecord level of $8.23 billion. With an improvement in the level
\nof business confidence, exporters were able to take full
\nadvantage of the weak rupiah in competing on the world market.<\/p>\n
However, the world economic slowdown the following year
\nreversed the trend. In 2001, Indonesia's total exports dropped by
\n9.8 percent -- the largest drop recorded in the last 12 years --
\nto $56.03 billion, partly due to a fall in non-oil exports.<\/p>\n
According to data provided by the National Statistics Bureau
\n(BPS), non-oil exports dropped by 9.11 percent to $43.40 billion
\nlast year.<\/p>\n
Although the statistics agency did not reveal the combined
\nvalue of textile and garment exports in 2001, the trends were not
\nencouraging.<\/p>\n
Existing data only cover the value of unknitted textile
\nproducts, which mostly consist of fabrics and threads. Last year,
\nexports of these products totaled $3.2 billion.<\/p>\n
But the data show a slight increase in exports of garment and
\ntextile products to $4.77 billion in the first half of last year
\nfrom $4.69 billion in the same period the previous year.<\/p>\n
The textile association estimates that textile exports would
\ndecline by 25 percent in 2001.<\/p>\n
Observers and analysts are generally skeptical about the
\nindustry's ability to sustain export levels this year. Although
\nthe rupiah remains weak against foreign currencies, the country's
\ntextile and garment products still face difficulties in competing
\nwith those from their main rivals, such as Thailand, China and
\nVietnam.<\/p>\n
The fact that the world's textile buyers have switched to
\ngarment products from South America has added to the woes facing
\nAsian exporters, particularly those from Indonesia.<\/p>\n
At least 75 percent of the world's apparel production, worth
\nmore than $135 billion per annum, is imported by the U.S., Europe
\nand Japan. In 2001, however, apparel exports from Asia showed
\nonly a 5 percent increase, while those from South America rose by
\n25 percent.<\/p>",
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