Textile industry to lose more workers

Textile industry to lose more workers

Sandy Darmosumarto, The Jakarta Post, Jakarta

Textile producers have painted a grim picture of the outlook
for the country's textile industry for this year, predicting the
closure of dozens of factories leading to a reduction of national
output by around 20 percent.

The slump will result in massive job losses, with a senior
official of the Indonesian Textile Association (API) predicting
50,000 job losses in West Java alone.

Apart from West Java, the other major textile center in the
country is Central Java.

Lili Asdjudiredja, chairman of API's West Java chapter, told
The Jakarta Post that around 20 percent to 30 percent of the
total textile factories in the industry might choose to close
down in 2004 due to an inability to face cutthroat competition in
local and international markets from producers from other
countries.

Lili said that around 121 members of the association had
reported closures in the past four years. Taking into account
businesses that were nonmembers or failed to report to API, the
actual figure might be higher.

Lili predicted textile production would decline by around 20
percent this year. Automatically, this would mean an additional
reduction from the present capacity utilization of around 60
percent.

Association executive director Indra Ibrahim said that at
present there was a global increase in demand for textile
products but the price tended to be cheaper.

However, rather than dropping prices, Indonesian producers
raised the price of their products. Meanwhile, producers in China
and Vietnam, which are now among the dominant players in the
global textile industry, have managed to supply cheaper products.

Local producers have complained that their costs have
increased over the past few years due to the increase in minimum
wages and the introduction of new regional and national taxes, as
well as rising electricity and fuel costs.

As a result, many foreign operated factories have chosen to
relocate production activities to neighboring countries.

Lili, however, commented that Indonesia still had an advantage
over China in the fiber-making, dyeing and finishing processes.

Following the fall in production, he expected export figures
this year to drop by around 20 percent. However, he said, textile
and raw material imports would increase for two reasons.

Local producers were starting to import raw materials required
for production because they are deemed cheaper. Additionally,
consumers preferred to purchase lower-priced imported textile
products bearing similar quality to those produced locally.

With a slightly increased demand for textiles linked to
election campaign activities expected in the first months of the
year, local absorption could increase by 10 percent to 15
percent. Lili said that consumption would then return to normal
levels for the remainder of 2004.

The Indonesian textile industry has continuously been losing
its domestic and foreign markets to countries such as China and
Vietnam, which are able to produce the same quality textiles at a
a lower production cost, partly due to low labor costs.

According to Lili, suspension of employment would be carried
out in stages as producers were still hoping for a magic formula
to be prescribed by the government that would help production
activities in the textile industry.

However, Indra told the Post that such a formula was
impossible to come by as the executive and legislative bodies of
the government would be preoccupied with the general election.

It is most likely that a solution will not be formulated until
2005 when the quota system in the global textile trade will be
eliminated. Many analysts have predicted that Indonesia's textile
industry will struggle further to gain local and foreign markets
due to its inefficiency.