Has Indonesia a stable textile future?

Has Indonesia a stable textile future?

By Virginia F. Bodmer-Altura

Indonesia has a very intact future in regard to economic development however it is necessary that the infrastructure is enhanced and the same is true for the modernisation of the textile and clothing industry, and therefore the country offers further excellent opportunities for textile machinery manufacturers in the next years to come.

The Indonesian government has very ambitious goals for the modernisation of the textile and clothing industry serving domestic growing demand because of better incomes of young middleclass citizens as well as for exports. The main destination for such exports is China and there demand will be driven also more domestically.

The official projections

The plans of the government are ambitious, because the projections by the Ministry of Industry predict that exports will expand from the value of 2010 of around USD 11.2 billion to USD 54 billion by 2025. Therefore the need for modernisation is given because some of the production means in the mills and clothing factories are outdated and sometimes up to 20 years old. The official estimates for the textile fibre production provide an increase from 1.3 million to 6.1 million tons in the mentioned timeframe and thereof 90% is earmarked for domestic production. Also employment should increase from today 1.3 million to 3.1 million.

Today Indonesia enjoys a global market share in textiles of 1.8 % and by 2014 it should expand to 2.5 % and then double until 2025. Most textile production is located on the Island of Java, one of the world’s most populated area. Indonesia – it comprises of 13’000 islands – has actually a population of 240 (worldwide it is the4th largest nation) million and the average daily income is around USD 2.36. The GDP amounts to more than USD 720 billion and grew 2011 by 6.5 % and foreign direct investment increased by estimated 8 % against 2010. The World Bank has revised its GDP estimates from 6.3 % to 6.2 % confirming the excellent positioning of Indonesia in the most thriving South East Asia region and when the ASEAN Economic Community (AEC) will become effective in 2015 Indonesia will form part of a market with over 600 million people. Indonesia has decreased its debt burden to very low levels in the past decade and its currency has enjoyed since 2009 a relatively high stability. For needed infrastructural programmes (roads, railroad, bridges and ports) the government has budgeted in 2012 a value of EUR 5.3 billion and foreign bidders are welcome. The danger lays in the fact that for such projects local corruption and inferior execution quality are still applied in tradition of former dictatorial bribery however the democratic government is dedicated to eliminate such elements by rules and regulations. 

The textile factors

According the ITMF Country Statements 2011 there was a machinery restructuring program in place initiated during 2007 – 2010 for allowing an enhancement of the installed capacity of the domestic textile industry. In 2010 the production capacity index rose eight point as to 2009 and 18.5 points as to 2007. The production capacity in the finished textile sector reflected the highest increase by 17.2 points, followed by spinning with 11.1 points and apparel/garments by 3.5 points and the capacity load factor reached 76.5 % or plus 3.5 % and derived mainly from added capacity. Indonesia enjoys a reserve capacity of around 23.5 % equivalent to 1.78 million tons or USD 5.48 billion which gives room to further buy textile machinery. The most important gain in production resulted in finished textile goods, followed by yarn product and to a lesser extent in the fabric sector. The volume of production in 2010 amounted to 5.44 million tons, 594800 tons or 12.3 % more than 2009. In value terms the rise was 15.4% or USD 2.23 billion to a total of USD 16.76 billion. Apparel increased by 18.3 %, other finished textile good added 14.7 % and the largest increase was registered in yarn and fabrics with 294900 tons, respectively 119200 tons. In value terms yarns increased by USD 836.4 million to USD 4.57 billion and fabric products grew by USD 687.1 million to USD 6.23 billion. Household expenditure in non-food items increased 10.4 % in 2010 to IDR 1909.5 trillion.

The 2010 existing installations

The installed ring spindles amounted to 8819577 and OE rotors numbered 117256. In weaving there were 51736 shuttles looms and 194’249 (192000) shuttle looms installed. On average (full time equivalents) there were 1399856 people employed and the yearly working time was 2100 hours. The yearly working hours per active spindle amounted to 8592 and those per active loom to 4163. The average hourly cost of labour amounted to USD 1.49 including social costs.

The fibre consumption amounted to 589484 metric tons in the cotton area and to 1084260 metric tons in the manmade fibre sector and others amounted to 7985784 metric tons thus resulting in a total fibre consumption of 2469528 metric tons. Cotton (85% cotton or more) spun yarn production settled at 429981 metric tons, blends to 184278 metric tons and others to 912070 metric tons and filament yarn amounted to 975850 metric tons.

The woven cotton fabric reached 216264 metric tons, blends (51 – 84 % cotton) amounted to 196119 metric tons and others contributed 582725 metric tons. The production of knitted fabrics was 220633 metric tons.

The trade figures

Yarn exports amounted to 7890455 metric tons representing a value of USD 2189 million. 292167 metric tons of woven and knitted fabrics were exported in the value of USD 1615 million and woven and knitted Apparel amounted to 442311 metric tons in the value of USD 6500 million. The total volume of these three categories amounted to 1650806 metric tons in the total value of USD 10662 million.

Yarn imports reached 117458 metric tons and a value of USD 408 million.  Fabric imports amounted to 480575 metric tons in a value of USD 3459 million and apparel settled at 42178 metric tons representing a value of USD 289 million. Total imports of the three categories represented 719548 metric tons and a value of USD 4493 million.

Conclusions

Looking at the given facts and the economic prospects and under the condition that the government is capable of delivering its projections it looks like Indonesia continues to be a very promising economy, an expanding and more modern textile industry and therefore with growing opportunities for high quality textile machinery suppliers. Already now Indonesia has imported textile machinery from China, Japan, Taiwan, Korea and India but as well as from Germany, Italy and Switzerland. Of course there is growing competition from machinery manufacturers from Asia but Indonesia will bet also on top quality in order to modernize its industry for some time to come and then quality is a prerequisite in comparing total cost of the life cycle of those machines. On the other hand financing becomes a crucial factor and there China is definitely at the forefront. CTMTC China Textile Machinery Corporation grants loans without governmental guarantees at an interest rate between 4 -5 % to Indonesian textile firms to buy equipment from China whereas the interest rate of commercial banks amount to 11 %. 


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