RI textile trade still unaffected by global turmoil

The crises in the United States and Europe have so far not affected Indonesia`s textile and garment production and exports.

But Indonesian Textile Producers Association (API) chairman Ade Sudrajat said here on Friday the country`s textile industry was predicted to grow only slightly or by 2 percent in 2012 or much slower than in 2011.

Although world textile industry growth is predicted to drop next year, Ade said it would not happen in Indonesia and the ASEAN region.

"We have predicted that world textile industry growth in general will go down next year but in Indonesia and the ASEAN region it can still grow slightly," Ade Sudrajat said.

He said the decrease in world textile industry growth was due to the United States and European debt crisis in addition to a slowdown in China`s economy.

Ade said the crisis in the US and Europe would cause demand for textiles to decrease but national production would still grow slightly.

"The national textile industry in previous years could grow by 20 percent but we predict that next year it will probably increase by only 2 percent," the API chairman said.

Ade also said the national textile industry`s production cost in 2012 could go up as the government was expected to implement new sweeping policies affecting the economy next year.

Among the new policies the government was expected to adopt next year, Ade said, was raising the basic electricity rate and this would undoubtedly add to the financial burden of the national textile industry.

Ade estimated that the electricity rate hike would cause the national textile industry`s production cost to rise by more than 10 percent in 2012.

"Therefore the government should pay more attention to the textile industry by accelerating infrastructure development," Ade said, adding that the infrastructure development slowdown would affect industrial growth in general.

Ade said up till now, he had not seen any sign the global crisis was impacting the national economy but he acknowledged predictions it would be felt beginning next year.

In a discussion on the implementation of ASEAN Free Trade Agreement (AFTA), hosted by the the Communication and Information Ministry early November 2011, Ade said the competitiveness of Indonesia`s textiles and textile products was the strongest in the ASEAN region.

"We are prepared to face the ASEAN Economic Community 2015," he said at the time.

According to him, the national textile industry and textile product was the most complete in the upstream and downstream activities.

The Indonesian Textile Producers Association chairman confirmed that the country would be the manufacturer of the world`s largest rayon fibers in 2012 following the expansion of PT South Pacific Viscose production capacity of US$130 million.

Besides, he said PT Indorama has spent US$800 million to set up a polyester plant that would start producing in 2012 and that it would be an example of increasing interest to invest in textile sector.

"The government must seize the momentum of surging investment in textile industry, both in the upstream and downstream activities because the increasing number of investment will encourage development of yarn spinning and knitting plants to absorb a big number of employment," he said.

According to him, Indonesia`s textile industry was more competitive compared to industries in two competitors namely Thailand and Vietnam.

Ade said Thailand`s textile industry production capacity was about 30 percent below Indonesia`s, while Vietnam`s textile industry has grown rapidly in the past 10 years with exports of textile products valued at US$14 billion, higher than Indonesia, but it only came from garment exports.

Therefore he asserted that the government should provide adequate infrastructures, including ensuring electricity supply, improving ports and logistics to realize the target.

He said demand for electricity from Indonesia`s industrial customers, grows by 10 percent annually but electricity supply only grows less than 10 percent annually.

The API chairman said the textile market in ASEAN region has increased significantly following the implementation of the ASEAN Free Trade Agreements, including the reduction of import taxes.

"In the past two years the export value of textile products to ASEAN countries increased significantly from US$300 million to around US$1.3 billion," Ade said.

He added that regional economic integration in the framework of ASEAN Economic Community 2015 would have a positive impact on the improvement of Indonesia`s textile market and textile products.

"Free trade agreement will give us a greater chance to develop the potential market in Southeast Asia, especially in Malaysia, Singapore and Thailand whose people have higher purchasing power," he said.

Therefore, he expressed hope that the textile trade in the ASEAN region including Japan and South Korea would continue to grow.

Data from the Ministry of Trade indicated that the export value of textile products from January to August 2011 reached US$9.16 billion or rose by 23.4 percent from the similar period in 2010 which was recorded at US$7.42 billion.

Ade explained that at present Indonesia`s largest textile market was the United States, accounting for 37 percent, followed by the European Union 14 percent, ASEAN Countries 10 percent, and Japan 7 percent.

Meanwhile, Bank Indonesia deputy Governor Hartadi Sarwono said at an occasion in September that the crisis in Europe was a state crisis and not a consumer crisis.

According to him, the current global crisis was different from that in 2008 which was a consumer crisis so that Indonesia`s textile and textile product exports dropped by 11.4 percent at the time.

But he noted that if the United States and Europe failed to safeguard their economies, the state crisis could turn into a consumer crisis.

"If the crisis escalates into a consumer crisis, the Indonesian textile industry must be ready to face it," Ade said.

Indonesia is in eleventh place on the list of the world`s textile exporters and in the ninth position on the list of garment exporter countries

Source: ANTARA