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.