According to the industry analysis report of Indonesia’s Mandiri Bank, due to the strong domestic demand for Indonesia’s ready-to-wear garment market, which has driven the development of the overall textile and garment industry, the Indonesian textile industry performed well in 2019, especially the growth in the third quarter. The growth rate reached 15.08%, while the national economic growth rate during the same period was only 5.02%.
The report pointed out that the main export markets for Indonesian garments include the United States, Japan, and Germany, and the main export markets for textiles include China, Japan, and Turkey. According to statistics from Mandiri Bank, the export volume of ready-made garments from January to October 2018 reached US$7.42 billion. The export volume of ready-made garments from January to October 2019 reached US$7.15 billion, a decrease of 3.6%. It is estimated that the total export value of ready-made garment products in 2019 should exceed $9.9 billion.
The Indonesian government is optimistic about the textile and garment industry. The Ministry of Industry hopes that textile and garment exports will increase to US$15 billion in 2020, with annual production capacity reaching 1.64 million tons, and new The investment amount reached IDR 81 trillion (approximately US$5.9 billion). To achieve the above goals, the Indonesian government will strengthen its crackdown on illegal textile imports, accelerate the development of industrial land and surrounding infrastructure outside Java to reduce logistics costs, and establish vocational schools to cultivate relevant talents.
The Indonesian government also hopes to enhance export competitiveness through bilateral economic cooperation. Currently, Indonesia has signed bilateral trade agreements with New Zealand, Australia, Japan, South Korea, China, Hong Kong, and India under the ASEAN framework, and has signed economic partnership agreements with Chile, the European Free Trade Association, and Australia. At the same time, Indonesia is currently promoting the signing of the Comprehensive Economic Partnership Agreement (IK-CEPA) with South Korea, which is expected to be signed in the first half of this year. In the future, we will promote the negotiation of a comprehensive economic partnership agreement with the European Union and Turkey, and negotiate the signing of partial trade agreements with Iran, Mozambique, and Tunisia.
However, Indonesian textile and garment industries still need to overcome several unfavorable factors. For example, energy costs such as natural gas and electricity prices in Indonesia are among the highest among textile exporting countries, and labor costs in Indonesia are rising year by year (especially in West Java and Jakarta), causing textile factories to relocate to areas or other countries with lower labor costs. At the same time, Indonesian textile companies (especially traditional family businesses or small-scale manufacturers) have old machinery and equipment that reduces production efficiency. According to an analysis report, 30% of Indonesian textile factories use machinery and equipment that are more than 25 years old.
External environmental factors may also affect Indonesia’s textile industry. For example, since Indonesia’s textile industry raw materials (such as cotton, etc.) mainly rely on imports, the exchange rate of the Indonesian rupiah against the US dollar may also change. Increase production costs. According to the Indonesian Textile Association, the price of textile raw materials increased by about 5-6% last year. In addition, Sino-US trade friction has also caused Chinese products to be dumped in Indonesia.
According to investigations, in September last year, the Indonesian Ministry of Trade launched a defense investigation into products such as man-made fiber yarns, curtains and fabrics. Among them, temporary defense duties have been levied on fabrics in advance, while curtains and man-made fiber yarns have been excluded from the imposition of defense duties on textiles imported from Taiwan. In addition to the cases under investigation, the textiles currently subject to tax include polyester fiber cotton (28.74% anti-dumping duty).
