Exporters to Be Hindered by Financing Delays
Indonesia will be unlikely to boost or even maintain its exports of footwear, textiles and ceramics this year as a result of a wave of investment postponements and difficulties in securing financing for buying new equipment, industry associations say.
Speaking on Wednesday, Singgih Witarso, the deputy chairman of the Indonesian Footwear Association, or Aprisindo, said that some 25 foreign footwear manufacturers from Taiwan and South Korea had previously planned to establish factories or expand capacity in industrial estates in West Java and East Java.
However, with demand for Indonesian exports down in the wake of the global financial crisis, he said, $170 million of investments have been put on hold. Among the projects affected were factory expansions and the establishment of new factories.
“Most of the foreign investors are still determined to go ahead with the new investments in the footwear centers of West Java and East Java, but they have informed us that the projects will be delayed until the global economic turmoil dies down,” he said.
Besides foreign investment, he said, domestic footwear producers are experiencing difficulties in securing funding for reequipping, and are now relying on central and local government grants.
He said the industry was finding itself hard-pressed to maintain production, which had already dropped by around 20 percent of installed production capacity, which stood at 286.5 million pairs of shoes last year.
20
percent
decline in footwear production
He said that as a result of investment difficuties, the footwear industry would have a hard time meeting the $1.8 billion of exports recorded in 2008, or even the $1.6 billion in 2007, against a backdrop of falling demand in Indonesia’s principal markets, such as the United States, the European Union and Japan.
To bolster exports, he said the association was pushing for a number of what it believes are crucial policy decisions, including streamlining the importation process for leather, accelerated tax rebates, revised manpower regulations and improved infrastructures in the footwear manufacturing centers of Sukabumi, Tangerang and Surabaya.
“For all of this, more money will be needed, not only to increase production and exports but also to prevent major layoffs in the industry this year.”
Another sector that has been badly affected by the postponement of investment projects is the ceramic industry, which had been expecting $200 billion in local and foreign investment projects to go ahead this year.
The Indonesian Association of Ceramics Producers, or Asaki, said last week that the industry had been hit by a rash of investment delays by local and overseas producers, which were unwilling to press ahead until market conditions improved.
Among the investments that have been put back are projects by PT Arwana Citra Mulia, PT Doulton Indonesia, PT Jui Shin, PT Inti Keramik and PT Kaisar Keramik.
Asaki said that production had already fallen in 2008 by 20 percent to 224 million cubic meters per year from 280 million cubic meters in 2007.
The Industry Ministry is predicting that exports of ceramic products in 2009 will drop by between 10 percent and 20 percent from 434,151 tons in 2008.
In the textile and garment industry, the Indonesian Textile Association, or API, said that exports were set to fall by up to 20 percent this year from $10.48 billion last year due to shrinking demand from overseas buyers. Exports in 2007 were worth $9.9 billion.
The association’s deputy chairman, Ade Sudradjat, said the industry was finding it more difficult to compete in overseas markets due to inadequate production capacity and outdated machinery.
“To date, we have been relying on government assistance for reequipping purposes,” he said. “To compete with other textile producing countries, we have to urgently modernize as more than 80 percent of our production machinery is between 10 and 20 years old.”
According to Industry Ministry figures, Indonesian textile exports totaled $9 billion between January and October last year.
Speaking on Wednesday, Singgih Witarso, the deputy chairman of the Indonesian Footwear Association, or Aprisindo, said that some 25 foreign footwear manufacturers from Taiwan and South Korea had previously planned to establish factories or expand capacity in industrial estates in West Java and East Java.
However, with demand for Indonesian exports down in the wake of the global financial crisis, he said, $170 million of investments have been put on hold. Among the projects affected were factory expansions and the establishment of new factories.
“Most of the foreign investors are still determined to go ahead with the new investments in the footwear centers of West Java and East Java, but they have informed us that the projects will be delayed until the global economic turmoil dies down,” he said.
Besides foreign investment, he said, domestic footwear producers are experiencing difficulties in securing funding for reequipping, and are now relying on central and local government grants.
He said the industry was finding itself hard-pressed to maintain production, which had already dropped by around 20 percent of installed production capacity, which stood at 286.5 million pairs of shoes last year.
20
percent
decline in footwear production
He said that as a result of investment difficuties, the footwear industry would have a hard time meeting the $1.8 billion of exports recorded in 2008, or even the $1.6 billion in 2007, against a backdrop of falling demand in Indonesia’s principal markets, such as the United States, the European Union and Japan.
To bolster exports, he said the association was pushing for a number of what it believes are crucial policy decisions, including streamlining the importation process for leather, accelerated tax rebates, revised manpower regulations and improved infrastructures in the footwear manufacturing centers of Sukabumi, Tangerang and Surabaya.
“For all of this, more money will be needed, not only to increase production and exports but also to prevent major layoffs in the industry this year.”
Another sector that has been badly affected by the postponement of investment projects is the ceramic industry, which had been expecting $200 billion in local and foreign investment projects to go ahead this year.
The Indonesian Association of Ceramics Producers, or Asaki, said last week that the industry had been hit by a rash of investment delays by local and overseas producers, which were unwilling to press ahead until market conditions improved.
Among the investments that have been put back are projects by PT Arwana Citra Mulia, PT Doulton Indonesia, PT Jui Shin, PT Inti Keramik and PT Kaisar Keramik.
Asaki said that production had already fallen in 2008 by 20 percent to 224 million cubic meters per year from 280 million cubic meters in 2007.
The Industry Ministry is predicting that exports of ceramic products in 2009 will drop by between 10 percent and 20 percent from 434,151 tons in 2008.
In the textile and garment industry, the Indonesian Textile Association, or API, said that exports were set to fall by up to 20 percent this year from $10.48 billion last year due to shrinking demand from overseas buyers. Exports in 2007 were worth $9.9 billion.
The association’s deputy chairman, Ade Sudradjat, said the industry was finding it more difficult to compete in overseas markets due to inadequate production capacity and outdated machinery.
“To date, we have been relying on government assistance for reequipping purposes,” he said. “To compete with other textile producing countries, we have to urgently modernize as more than 80 percent of our production machinery is between 10 and 20 years old.”
According to Industry Ministry figures, Indonesian textile exports totaled $9 billion between January and October last year.