In Central Java Many producers change profession

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.