Textile products less competitive in overseas market<\/p>\n
JAKARTA (JP): Although Indonesia's textile exports performed
\nremarkably well last year, rising operating costs, political
\nuncertainty and the unstable rupiah have made the industry less
\ncompetitive in such major buying markets as the United States,
\nEurope and Japan.<\/p>\n
The economic slowdown in the U.S., the main buyer of
\nIndonesian textile products, has also added to the problem.<\/p>\n
The Association of Indonesian Textile Producers has described
\nthe current situation as the most difficult ever faced by local
\ntextile producers.<\/p>\n
The association's vice chairman, Lily Asdjudiredja, said the
\nincrease in production costs as a result of the recent hike in
\nfuel and electricity rates made most of Indonesia's textiles no
\nlonger competitive in the world market.<\/p>\n
Beginning this year, the price of diesel for industrial users
\nwas set at 50 percent of the international price in a bid to
\nreduce the government's fuel subsidy. This has caused an increase
\nin the price of diesel fuel for industries by an average of 50
\npercent. The government also raised the electricity rate for
\nindustries by about 100 percent.<\/p>\n
The rise in fuel and electricity rates has caused an increase
\nof more than 10 percent in the total operating costs of most
\ntextile producers, according to the producers.<\/p>\n
With the slowdown in the global economy, Indonesian textile
\nexporters are facing a more difficult situation. The poor
\ncondition of existing production and processing facilities makes
\nthe situation even worse, the textile association's executive
\nsaid.<\/p>\n
\"What we are most concerned about is the industry's falling
\nproductivity,\" Lily told The Jakarta Post in a recent interview.
\n\"Of the 240,000 weaving machines operated by textile producers,
\nonly 10 percent are under 10 years old,\" he added.<\/p>\n
According to Lily, with the existing facilities it is
\ndifficult for Indonesia to compete with China, Thailand and
\nVietnam. \"We have, in fact, been edged out, especially in the
\nmiddle and low end of the market,\" he added.<\/p>\n
Structural reform in the industry is needed, otherwise
\nIndonesia will lose its domestic market to other members of the
\nAssociation of Southeast Asian Nations (ASEAN) once the ASEAN
\nFree Trade Arrangement (AFTA) has been fully implemented next
\nyear.<\/p>\n
Under AFTA, the flow of goods including textile products
\nwithin ASEAN's members, which includes Malaysia, Singapore,
\nCambodia, Brunei, Indonesia, Laos, Myanmar, the Philippines,
\nThailand and Vietnam, will be free from tariff and nontariff
\nbarriers.<\/p>\n
Indonesia's textile exports, which dropped by about 3 percent
\nto US$7.2 billion in 1999, rose by 15 percent in 2000 to $8.3
\nbillion, the highest level ever achieved by the industry. The
\ngrowth rate was also the highest level recorded during the past
\neight years.<\/p>\n
The persistent drop in the value of rupiah against the U.S.
\ndollar during 2000 has caused difficulties to most local textile
\nproducers, especially in the procurement of imported raw
\nmaterials.<\/p>\n
But the relatively strong demand for textile exports in 2000
\nwas also much helped by the fall of the rupiah, which dropped to
\nbetween Rp 10,000 and Rp 11,000 against the American greenback
\nlast year, compared to between Rp 9,000 and Rp 10,000 in 1999.<\/p>\n
Indonesia's total exports jumped to a record level of $62.02
\nbillion in 2000, an increase of 27.43 percent during 1999. Non-
\noil and gas exports last year rose by 22.91 percent to $47.78
\nbillion, while oil and gas exports jumped by 45.39 percent to
\n$14.24 billion.<\/p>\n
The performance of textile exports for the first quarter of
\nthis year was, in fact, not so bad despite the gloomy outlook.<\/p>\n
According to data provided by the Central Bureau for
\nStatistics, textile exports in the January to March period rose
\nby 11 percent to $2.01 billion comprising $1.14 billion from
\ngarments and apparel and $870.2 million from textiles.<\/p>\n
Most local producers are pessimistic that the rise in textile
\nexports can be maintained. They say, besides the low rate of
\nproductivity, their higher operating costs will make it difficult
\nfor them to survive fierce competition in the international
\nmarket.<\/p>\n
The strengthening of the rupiah against the U.S. dollar to an
\naverage of Rp 8,500 following the recent appointment of Megawati
\nSoekarnoputri as president has had, to some extent, a negative
\nimpact on export-oriented companies such as textile producers.<\/p>\n
Lily from the textile association said the stronger rupiah
\nreduced the competitiveness of textile products.<\/p>\n
In terms of dollars, the labor costs for the Indonesian
\ntextile industry is no longer competitive. \"With the appreciation
\nof the rupiah, labor costs for local textile companies is now the
\nhighest among Asian textile producers,\" he said.<\/p>\n
According to him, at the exchange rate of Rp 11,500, the
\naverage monthly wage in the Indonesian textile industry was about
\n$35. With the strengthening of the rupiah to Rp 8,500, the labor
\nwage has risen to $49, higher than $40 in Vietnam, $35 in
\nCambodia and some $27 in Myanmar.<\/p>\n
The association's secretary general, Irwandi Muslim Amin, said
\nthat the impact of the global economic slowdown has pinched
\ndeeper into the country's textile industry.<\/p>\n
In a recent newspaper report, he said that many American,
\nEuropean and Japanese buyers had cut their imports from
\nIndonesian exports during the first quarter of this year due to
\nthe economic slowdown.<\/p>\n
He said that many buyers had also shifted their orders to
\nother countries due to political uncertainties and the growing
\nnumber of labor disputes within the industry.<\/p>\n
As a result, many textile companies have reduced their
\nproduction levels to about 60 percent, compared to 90 percent
\nlast year, he said.<\/p>\n
\"Many local textile companies only opened for half a day due
\nto the lack of demand,\" he added.<\/p>\n
The textile industry is not only the country's largest foreign
\nexchange earner but also the largest job provider. As one of the
\neconomic engines, the industry has received strong support from
\nthe government, mostly in the form of low import duties.<\/p>\n
But Lily said such support was no longer enough to revitalize
\nthe industry where many companies had been forced to shut down
\ndue to their inability to compete in the global market.<\/p>\n
\"There should be concrete action from the government to
\nrestructure the industry,\" he said, citing that many companies
\nare dying due to a lack of capital and taking out bank loans is
\nvery expensive for them.<\/p>\n
According to him, the tight money policy adopted by the
\ncentral bank has caused an increase in lending rates to a level
\nthat is no longer affordable to most business players.<\/p>\n
\"The government should come up with concrete action to cope
\nwith the high interest policy,\" he said, adding that many textile
\nproducers may soon close down if they don't manage to secure new
\nsources of income.(Hendarsyah Tarmizi)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/textile-products-less-competitive-in-overseas-market-1447893297",
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