In Central Java Many producers change profession

Blontank Poer, Correspondent, Semarang

The world's economic slowdown and a further decline in overseas orders following the terrorist attacks on the United States on September 11 last year have exacerbated the problems facing the country's textile industry.

Textile producers in Central Java, one of the country's four major textile producers, the others being Jakarta, West Java and East Java, have not been immune to the downturn.

Many textile producers in the province have even considered becoming traders because running a manufacturing business is deemed no longer profitable.

"Many friends in the textile manufacturing industry are considering changing their profession to traders. Becoming a trader might be more profitable at present as imported products such as those from China are much more competitive in the local market," said Setiawan Santoso, the owner of garment producer PT Rodeo.

According to him, the decline in overseas demand has forced many garment producers in Central Java to cut production. Although some of them are able to survive, most are in a critical situation.

Setiawan said that some textile companies had managed to maintain their activities thanks to the help from larger textile firms, which sub-contracted part of their orders to smaller firms. "But the situation has changed following the terrorist attack against the World Trade Center (WTC) in September last year. Many buyers have canceled their orders," he said.

Separately, the chairman of the Central Java chapter of the Association of Indonesian textile producers (API), Andi Sanang Romawi, said that falling overseas demand was not the only factor contributing to the local garment producers' difficulties. He said that low domestic demand was also part of the problem.

"The decline in people's buying power due to the country's economic crisis remains a major problem in the domestic market," said Andi, who is also the president of PT Damatex Salatiga.

Security concerns have also contributed to the fall in overseas demand. The threats of "sweeping" operations made by Muslim radicals against American citizens following the start of the U.S.-led strike against Afghanistan are still having an impact today.

Andi said that many overseas buyers had suspended their Indonesian orders out of fear that the sweepings could materialize and affect shipments. Indonesian buyers have switched to other Asian countries such as Singapore, Thailand, China and Vietnam to ensure prompt delivery.

According to him, the utilization of the province's textile production capacities has dropped to about 60 percent due to the fall in the demand.

"Major textile companies suffered a drop in sales by about $1 million each last year," he added.

Bambang Priyono, the head of the foreign trade department of the provincial office of the Ministry of Industry and Trade, said that many overseas importers had chosen to buy from China, Vietnam or Bangladesh because Indonesian textile products were too expensive.

"The production costs in those countries are lower than those in Indonesia. No wonder their garment products are cheaper," he said.

The province's textile exports have shown steady growth over the past four years. According to the province's industrial and trade office, exports of textiles and textile-related products rose from US$586.76 million in 1998 to $596.86 million in 1999 and again to $730 million in 2000. The data for 2001 exports are not yet available but the association estimates a drop in the order of 30 to 50 percent.

Setiawan, who is also the chairman of the local chamber's department for textile industries, said that garment producers who sell most of their products to the U.S. suffered most from the world's sluggish demand.

"Those who sell their products to Europe and the Middle East are still able to survive. Orders from these countries still flow even if with lower prices," he said.

For major textile producers such as PT Apac Inti Corpora, the low demand did not really affect its business activities. The company, which sells about 97 percent of its textile products to the U.S. and Europe, announced an expansion plan late last year despite the unfavorable market situation.

Apac's finance director, Anas Bahwen, said that the company planned to invest about Rp 5 billion this year to boost production.

The chairman of the Central Java investment board, Yeru Saliminto, believes that the textile industry remains promising despite the current difficulties.

According to data issued by the investment office, at least 13 new investors applied for permits to enter the textile sector. Six of the new investment plans will involve foreign investors.

Yeru said that in order to attract more investments, the Central Java administration planned to build two toll roads; one linking Surakarta and Yogyakarta, and another one connecting Semarang and Surakarta.

Meanwhile the head of the labor department of the local chapter of the legal aid foundation (LBH), Tasi Denny Septiviant, said that a number of companies had conducted massive lay-offs last year as they were unable to pay workers' wages. PT Colombo, for example, closed down operations and dismissed its 500 workers. PT Dupantex laid off 1,750 workers.

He believes the figures represent only a small portion of the workers laid off by textile companies in the province last year.

Many companies did not report lay-offs to the local manpower office as around half the laborers working in the province's textile industries are temporary workers, he said.