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.