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

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?