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