Textile industry must improve to survive, warn analysts
Textile industry must improve to survive, warn analysts
JAKARTA (JP): Comprehensive restructuring and efficient
bureaucratic procedures are needed if the local textile industry
is to survive, according to stock analysts.
Three analysts contacted by The Jakarta Post on Monday said
that many textile companies had lost their competitiveness after
new overseas players entered the market because of local
inefficiencies and their small size.
"I think it would be difficult for the textile sector to
maintain its position as the country's single largest exports
outside oil and gas," a PT HG Asia Indonesia analyst said.
"I would say that our textile industry, at its present stage
of development, is already mature or, as investors describe it, a
'sunset' industry. So, in my viewpoint, it's time for textile
companies to diversify their product mix and focus on higher
quality or value-added products," Hanafi Wongso from PT BZW Niaga
Securities said.
The analysts blamed production and distribution inefficiencies
as the major factors slowing most textile companies' growth.
"The (textile) industry can survive if it can be more
progressive in using technology and in improving its economies of
scale," Phua Kok Kim from PT HSBC Securities Indonesia said.
Kim said the future would be positive for large companies
(like Polysindo and Indorama) because they were using efficient
technology.
"Moreover, with a big business scale, they (large companies)
can obtain capital more easily," Phua argued.
Phua said smaller companies must consolidate.
He said that industry sources say that textile exporters would
be more competitive if bureaucratic procedures were streamlined
to improve distribution.
The HG Asia analyst, who requested anonymity, said that,
because it was labor intensive, Indonesia's textile industry was
less attractive than in other countries, particularly Myanmar,
Sri Lanka and Latin America, which have cheaper labor.
She said the key to boosting the industry's performance was to
attract more investment to increase plant capacities and improve
production technologies. But she said it might be too late for
some firms.
"A multinational firm recently told me that it has considered
moving to Sri Lanka," she said.
The analyst reckoned the future of the textile industry would
depend on its target market: for exports or the domestic market.
"I would say that there is still a bright future for a textile
company which concentrates on the domestic market with an
assumption that the domestic consumption will grow in line with
increases in purchasing power," she said.
But she said it was difficult for Indonesian textile firms to
increase their exports because their competitors in other
countries were improving.
Hanafi said that textile companies could maintain their
profitability by increasing their capacity.
"With more players coming into the market, they can no longer
expect significant price increases. So, they should increase
sales volume," he said. (alo)