Indonesia’s textile and garment exports rebounded strongly in 2017, rising around 5% to US$12.4bn after four years of stagnation, the head of the country’s textile industry association has revealed.
Factory relocation, political stability and less labour unrest contributed to the growth, says the chairman of the Indonesian Textile Association (API – Asosiasi Pertekstilan Indonesia), Ade Sudrajat.
“This is very encouraging because it’s happening at a time when there’s a downturn in global demand,” says Sudrajat.
The country’s textile exports had steadily declined from US$13.2bn in 2012 to US$D11.8bn in 2016, according to Sudrajat, who adds that more than 50 clothing factories have relocated to Central Java province, where wages are lower than those in West Java and Banten provinces. Companies have also started to adopt newer, more efficient technology – all factors contributing to the turnaround.
Another positive benefit has been improvements in labour relations. “It wouldn’t be possible if there were a labour protest every week,” says Sudrajat.
Over the past few years, Indonesia has seen frequent street rallies by workers demanding better pay and more favourable working conditions. But Sudrajat says the government has devised a simplified wage formula for the industry to follow, taking into account the country’s economic growth and inflation, and this seems to have eased the number of industrial disputes.
He says the next five years will be crucial as Indonesia seeks to compete with fellow south-east Asian countries, such as Vietnam, in selling textile exports.
Increasing labour costs in China have made Indonesia and other Asian countries such as Bangladesh and Vietnam attractive production bases for global fashion brands.
“We have to take advantage of this momentum to boost exports, but policy consistency from the government is needed for this favourable climate to be sustainable,” says Sudrajat, who adds that investment in the textile sector reached US$759m in 2017, a phenomenon that he says is a testament to investor confidence in the country’s stability.
Sudrajat also welcomes the 2017 (and ongoing) scrapping of burdensome red tape that restricts production and trading. “The government’s decision to do away with 3,000 regulations and bylaws considered to be an impediment to investment is bearing fruit,” he says.
Sudrajat says the upstream textile sector, which supplies fibres, yarn and fabric, has been the main beneficiary of the rising exports.
Indonesia’s largest integrated textile and garment company, Sritex, last year invested Indonesian rupiah IDR2.6tn (US$208m) to expand its production facilities in Sukoharjo, Central Java.
The company currently operates 24 spinning factories, seven weaving factories, five finishing factories and 11 garment factories.
Achmad Sigit Dwiwahjono, director general of chemical, textile and multifarious industries in the Indonesian ministry of industry, says the government will this year resume a textile machinery restructuring programme, which was shelved in 2015 pending a review of its state-only funding (the government is now seeking part-funding from the private sector).
Under this programme, aimed at supporting industry growth, participating companies are given incentives such as discounts on machinery purchases and a lower interest rate.
Dwiwahjono says outside funding being sought includes money from Chinese banks, which offer lower interest rates than domestic lenders.
And he says the red tape reductions will continue: “We are streamlining regulations, licensing and the bureaucracy to make it easier for industry players to do business in Indonesia,” he adds.
The government hopes Indonesian textile and garment exports will rise to US$15bn in 2019 and that 3.1 million people will be employed in the textile industry, a record high.
Source: www.wtin.com