English     |     Español     |     Français
Exporting to Canada - Experts in trade for developing countries - TFO Canada
HIDE
  
Sign In or Register
Username:     Password:
 
Remember me   Forgot password?
Not a member? Register here
Not a member? Register here    
Home > About TFO Canada > News

Trade News

Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Call for incentives as Indonesia aims high in textiles

Monday, November 24, 2014 > 09:06:00
Print


(The Borneo Post)

The textiles industry in Indonesia is growing steadily, nudging Jakarta closer to its long-term goal of rivalling China as a global leader in garment exports. However, sector players say stronger trade pacts are needed as well as more investment to maintain a competitive edge in the regional and international marketplace.

A surge in demand for football shirts during the 2014 World Cup helped Indonesia post textiles sales of US$5.3 billion in the period from January to August – representing a 4.8 per cent rise on last year’s total of US$12.6 billion –with an export target of US$13.3 billion for 2014.

Competitive advantage

The export target for 2014 is part of national plans to become the number one globally in textile exports by overtaking China, which is shifting its economy from textiles to services. Jakarta is aiming for total exports of garments and textiles to reach US$75.4 billion by 2030 while raising the contribution to global textile exports from 1.8 to five per cent.

“We see huge upside potential for the country’s exports given highly competitive labour costs and attractive demographics, as well as infrastructure reforms under the new government post the election,” said Citi in a note published in April.

Momentum towards that ambition was underlined by profits from the largest Indonesian garment maker, Pan Brothers on October 1. The firm, which manufactures brands such as Nike, North Face and Lacoste, reported a 33.5 per cent rise in net profit for the first half to US$6.9 million. Its revenue rose two per cent to US$162.9 million largely thanks to export sales, which hit US$151.6 million.

The firm recently outlined plans for a US$70 million, three-year expansion to help it tap the growing demand for garments in Southeast Asia’s emerging markets.

This trend is also evident in Indonesia, where a growing middle class is expected to fuel a surge in local textiles consumption in coming years. Domestic sales are forecast to increase by seven per cent this year to a value of US$7.5 billion, according to the Indonesian Textile Association (API) following a 10 per cent decline in 2012 to 2013.

“Strong domestic demand for Indonesian textile products remains, despite competition from lower-priced, high-quality imported textile and textile products,” wrote the US Department of Agriculture (USDA) in an annual report released in April.

Tough competition

Indonesia currently ranks ninth in global textiles exports. The industry, combining textiles, leather goods and footwear, employs about 1.5 million workers and is expected to contribute 10.7 per cent of non-oil and gas exports in 2014.

However, Indonesia faces tough competition from players emerging in Southeast Asia that have lower production costs and cheaper labour. Vietnam, for example, has managed to carve out a 3.3 per cent share of global textiles and garments exports and expects to attain a US$23.6 billion export target for 2014.

In 2013 the US was the largest importer of Indonesian textiles and clothing, at a value of US$4.1 billion, followed by Japan and Turkey with imports of $1.2 billion and US$620 million, respectively.

However, while Indonesia has maintained its position as the sixth-largest textile exporter to the US, unchanged since 2000, Vietnam has jumped to third position from as far back as 82nd in the same period.

Industry leaders say new trade deals are needed with countries around the globe to secure a long-term future for Indonesian textile exports. To this end, Indonesia has expressed interest in joining the multilateral Trans-Pacific Partnership, a proposed regional free trade agreement (FTA) with 12 members so far including the US. However, the government is still waiting for approval to participate in an FTA that would open opportunities for higher Indonesian textile exports to Europe.

Challenges to achieve this aim remain. A senior official at Pan Brothers said the government needed to do more to tackle the challenges for textile exporters.

“Indonesia has the potential to become a global supplier of garments. Policies, however, should be revised in order to attract more investments in this sector and build local competition, as well as facilitate exports to capitalise on Indonesia’s strategic location,” vice-chief executive Anne Patricia Sutanto told OBG.

High costs

Indonesia’s infrastructure costs are high compared to new players mushrooming in the region, such as Vietnam and Cambodia.

For example, domestic textile manufacturers saw production costs jump nearly 15 per cent as a result of Indonesia’s electricity tariff hike in May.

Electricity now accounts for up to 35 per cent of total production costs for textile companies, a factor that industry leaders say may erode their competitiveness.

The government needs to invest more in the industry to fulfil local demand and reduce dependency on imported raw materials, textiles manufacturers say. Investment is also needed in improving human capital through better training of skilled workers and managers.

“The quality of education and training of skilled workers and managers has a direct impact on the financial results of our companies,” said Sutanto. “More needs to be done in this area from the public sphere in order to help us reach higher levels of business performance.”

Ade Sudrajat, general chairman of the Indonesian Textile Association (API), told local media that the country should be doing more to take advantage of a surge in global textile products, highlighting the advancement of other regional players such as Vietnam.


Contact TFO Canada
Meet Our Supporters
TFO Canada
130 Slater Street
Suite 1025
Ottawa, Ontario
CANADA   K1P 6E2
T 1.613.233.3925
F 1.613.233.7860
Canada Toll-Free:
1.800.267.9674
 
© TFO Canada   |   Sitemap   |   Terms & Conditions   |   Privacy Policy   |   Contact Us