Prospects for Bali's garment export remains grim
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.