Armani buys RI textiles, 'why don't we?'

Zakki P. Hakim, The Jakarta Post/Purwakarta

Most people would be curious to know why an Armani suit costs US$2,500.

Roy Soetanto is not wrong in claiming that his top-quality yarns contribute to the high price tag, as U.S.-based fashion designer Giorgio Armani uses only the finest fabrics including those made from yarns spun in a mill located in Sadang, Purwakarta, West Java.

Roy, the managing director of spinning mill PT Benangsari Indahtexindo, said that the factory only produces yarns for high- end consumers, a specific market which giants China and India realize is out of their league. At least for now.

"India has made fine yarns, but apparently the market is not satisfied with the quality," Roy told journalists during a recent factory visit.

China, meanwhile, seems to keep its focus on the lower-end of the market.

Industry observers have said that it would be difficult for Indonesian textile makers to compete with the more efficient producers from China in the low-end market particularly after the termination of the global quota system. They suggested the local industry follow the footsteps of Benangsari capitalizing on the country's global reputation for producing high-quality fabrics for the high-end market.

The U.S. Agency for International Development (USAID) said in a report: "Indonesian design capabilities are relatively good and, with technical input from foreign buyers, will enable Indonesia to retain its niche in higher-end products."

Benangsari is among the few textile companies that have relatively unharmed by the current crisis plaguing the local textile industry.

Indeed, at a time when most banks avoid lending money to the textile industry (following warnings from the banking authority that the industry is a high-risk sector because it is saddled with huge unrestructured bad loans), the giant Bank Mandiri in 2001 gave some US$40 million to Benangsari to finance the purchase of new machinery.

Benangsari, with its additional 55,000 spindlers, increased its production to 40,000 bales (around 7,300 tons) of yarn last year from 35,000 bales in 2002. Having now a total of 83,000 spindlers, it is expected to produce 60,000 bales this year.

It exports nearly 100 percent of its production to the U.S., Europe, Japan and Korea.

The net export value stood at $23 million last year, while this year the company expects to net $35 million, and up to $45 million next year.

The strong export performance showed by companies like Benangsari has somehow softened the stance of the central bank, which recently agreed to the Ministry of Industry and Trade's suggestion to encourage private banks to use a business-to- business approach rather than a sector-to-sector approach in their lending policy.

The ministry's director general of metal, machinery, electronics and miscellaneous industries Subagyo said it would not be fair to generalize that the textile industry was plagued with high bad debts as some companies were financially sound.

The textile industry, which in the past had been the country's top non-oil and gas exporter employing millions, has been facing serious problems in the past couple of years.

One of the most pressing problems is the lack of financing to replace old machinery, to enable them to compete with producers from countries like China, India and even Vietnam. Some of the 2,600 textile makers are on the brink of bankruptcy, while several others have closed down.

The government has said that the industry would need at least $500 million to finance the replacement of old machinery.

"The revitalization would focus first on the knitting, weaving and finishing industries," said Subagyo.

The products (fabric and yarn) of the three industries have the highest international demand among other Indonesian textile products. Yarn and fabric accounted for 43 percent and 23 percent of Indonesia's export volume from 2001 to 2003. Indonesia's textile and textile articles exports last year were $7.03 billion.

The sector, said Subagyo, was capable of competing in the global market thanks to the advantage of a large domestic market for textiles and apparel that has fostered the development of a vertically integrated industry.

"However, the question now is will Indonesians be loyal to their own products?" he said.

Well, if Giorgio Armani likes our products, why don't we?