API paints bleak outlook for textile industry

API paints bleak outlook for textile industry

Dadan Wijaksana, The Jakarta Post, Jakarta

The outlook for the country's textile industry is expected to
remain bleak next year, due to a combination of the global
economic slowdown and higher production costs, according to the
Indonesian Textile Association (API).

"From my point of view, we will face difficult times and
gloomy prospects next year," Indra Ibrahim, API executive
director, told The Jakarta Post on Wednesday.

With both export and domestic markets showing only a little
improvement, he said, it would be an uphill task for the textile
industry just to survive.

Total export volume for 2002 is predicted to stand at 1.35
million tons, or some 10 percent lower than that of this year's
estimated 1.5 million tons.

After showing a remarkable performance in 2000, in which it
amassed US$8.2 billion in exports, the industry experienced a
sharp downturn this year with a decline in total export value
reported to reach 20 percent.

The economic slowdown worldwide, signaled by the shaky
performance of the world's major economies including Japan and
the U.S., was mostly to blame for the disruption in market
sentiment for exports.

The Sept. 11 suicide attacks on the U.S., Indonesia's main
export destination, have only made it worse. The U.S. market
absorbs some 26.5 percent of the country's textile products
valued at $2.1 billion per year.

With other major markets such as Japan and Europe also facing
domestic problems of their own, Indonesia is running out of
alternate markets to shift its export destination.

With recession set to trap Japan, and a weaker Euro currency
against the American dollar, this will further hamper their
appetite for imported goods.

Turning to the domestic market is also not the best option,
according to Indra, because of the low purchasing power of the
people.

The increase in fuel and electricity prices will add to the
problem with the consequent rise in production costs.

Producers have estimated, the rise in fuel and electricity
rates will cause an increase of more than 10 percent in the total
operating costs of most textile companies.

The textile industry is not only the country's largest foreign
exchange earner but also the largest job provider, absorbing no
less than 1.2 million workers.

The implementation of the ASEAN Free Trade Area (AFTA),
starting next January, will also place the country's strategic
sector at a bigger risk.

Under AFTA, the flow of goods including textile products
within ASEAN's founding member countries, which include Malaysia,
Singapore, Cambodia, Brunei, Indonesia, Laos, Myanmar, the
Philippines, Thailand and Vietnam, will be free of tariff and
nontariff barriers.