Prospects for Bali's garment export remains grim
Moch.N. Kurniawan and Novan Iman Santosa, The Jakarta Post, Denpasar, Bali
The garment and textile industry has been over the years one of the engines driving Bali's economy, but the prospects for the industry look gloomy and will probably remain so for the foreseeable future.
Provincial officials and businesspeople in the industry have predicted that garment exports will be relatively flat this year.
"We expected some US$160 million in revenue from garment exports, but this figure will not likely be achieved," the head of the Bali Trade and Industry Agency, I Gusti Ketut Mendra, told The Jakarta Post.
"Last year we set the target at $160 million but only $148.8 million was achieved," he said.
Mendra blamed the appreciation of the rupiah as well as the industry's dependence on imported raw materials for the gloomy outlook on garment exports this year.
The rupiah has strengthened against the US dollar for the last several months, and currently stands at about Rp 8,900 against the dollar.
"Suppose the rupiah strengthens Rp 1,000 against the greenback from Rp 10,000 to Rp 9,000. This would force producers to increase prices by Rp 2,000 to cover their expenses and ensure a profit margin," said Mendra.
"Then prices will be higher in U.S. dollars, prompting buyers to find other producers or perhaps even other countries. Our producers, however, have no other options to keep their business afloat," he said.
Despite the pessimistic outlook, however, there was a 13 percent increase in garment exports to $75.9 million in the first five months of this year, from $66.8 million in the same period last year.
But Mendra said this increase between January and May was merely due to high-season orders from the end of last year, with the orders only being delivered early this year.
He said the rest of this year was unlikely to be as strong as previous months due to fewer orders and the appreciation of the rupiah.
Bali's garment exports stood at $136.4 million in 1996, $162.6 million in 1997, $152.1 million in 1998, $169.4 million in 1999, $170.1 million in 2000 and $148.8 million in 2001.
Local garment producers make a large variety of fashion items, ranging from simply designed clothes to orders from world-class designers. The garments vary from cottons and knitwear, to embroidery and leather items.
Bali's glittering garment industry began to dim following the economic crisis in l997. The troubles faced by Bali reflected the situation of the country's entire textile industry.
Besides tourism, textiles is the main industry in the province, which is home to a small number of big-scale producers including Kecak, Mama & Leon, PT Diana Tina Ayu and Animale, as well as 137 small and medium-size enterprises.
The province's garment industry provides more than 40,000 jobs.
The main destinations for exports are the U.S. and Japan, according to Mendra. The island's garment products are also shipped to the European Union, Australia and Scandinavian countries.
Every year, six to seven new garment companies emerge in the province, he said, adding that the center of the garment industry is the regencies of Badung and Gianyar, and the Denpasar mayoralty.
Interviewed separately, Putu Agus Antara, the president of Mama & Leon, pointed to other factors that were causing the declining of garment exports from Bali.
"Many buyers have shifted their orders to countries like China and Vietnam due to their faster delivery service, in addition to the cheaper prices," he told the Post.
"Bali's delivery system is obsolete. It takes about three months to go from production to the delivery of the goods. Our competitors only need three weeks to do this," he said.
According to Putu, Bali's garments are also more expensive than those from many other countries, because its raw materials must be imported and its machines are old and inefficient.
Putu estimated that Bali's garment exports had declined by about 30 percent from the level in 1997.
He said he did not believe the data from the Central Bureau of Statistics, which shows Bali's garment exports have been relatively stable at between $150 and $170 million from 1997 to 2001.
Many garment producers in Bali may have sold their export quotas to producers from other provinces because they could not meet them, he said.
One exporter, Zainal Abidin of Haydar Asri Creations in Legian, said his company's exports had suffered a serious decline over the past few years. He attributed the decline in revenue to the decreasing number of buyers, the growing power of buyers to ask for lower prices and the emergence of new local players.
"For retail, in 1997 we booked revenue of Rp 2 million (US$227.20) a day, now we're lucky if we get Rp 250,000 a week," he told the Post, adding that the wholesale business had also declined sharply.
Retail is a purchase of less than 100 pieces, while wholesale is more than 100 pieces, according to him.
Haydar Asri was established in the 1980s, but it shut down several years later. It recommenced operations in 1996. The main owner is Helmy Asri of Surakarta. Most of the company's buyers come from Brazil, the U.S. and Italy.
According to Abidin, there were 10 exporters like him in 1996 in his area, but five of them have since gone bankrupt.
However, three new players have established garment businesses in the area. He said he had to lower the price of his sarongs from Rp 15,000 to Rp 11,000 each due to the competition.
Agus urged the provincial government to coordinate with the central government and businesspeople to help the industry, for example working together to organize more overseas promotions.
"We must strengthen our existing market and expand into new markets. We will never do this if we are too lazy to promote ourselves," he said.
As a comparison, he said, there might be only two or three Indonesian companies taking part in an international exhibition, but China will have about 100 firms.
Mendra said the problems with the garment industry in Bali were complex, ranging from the quality of products to promotion.
To resolve these problems, he said, his office was working to train companies to increase their productivity and the quality of their products.
His office has also sped up the export procedures to only one day, Mendra said. Another effort underway is to educate small and medium-size firms about ISO 9000 and other international standards.
Panudhiana Khun, the head of the Bali chapter of the Indonesian Chamber of Commerce, added that the decline in Bali's garment industry was cause by many factors.
"Most of those who have suffered from this setback are large- scale garment factories," said Panudhiana, the owner of PT Diana Tina Ayu.
There are a large number of smaller, newer companies that have managed to book significant profits, he added.
"They have successfully managed to create new and unconventional markets. Besides, they only produce limited products," he said.
A lot of small companies have experienced about 100 percent or even 200 percent growth this year.
"For big players, it is very difficult to survive. They need more investment in order to maintain their production lines. But the economic situation does not allow them to obtain any additional funds for investment and production," explained Panudhiana.
There are a number of other factors that have also hampered the growth of Bali's garment industry, including higher bank rates, a lack of firm laws on investment and the instable national political and economic situation.
"If the local garment industry cannot get fresh funds from local banks, then they will badly need foreign investors. Yet, the current regulations seem unfriendly and unappealing to (these foreign investors)," Panudhiana said.
Many foreign investors are also worried by unresolved labor problems, and uncertain social and political conditions.
"They would rather choose countries with abundant and cheap labor like Vietnam and China," he said.
The garment industry and the government must work hand in hand to lure investors.
"Don't be ashamed to acknowledge that we really need foreign investment to keep our economy going," said Panudhiana.