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Indonesia Rises as Textile Manufacturer; Exports to Reach $13.3 Billion in 2014

Indonesia continues to assert itself as a major force in the textile industry, with its exports likely to reach $13.3 billion in 2014, a 5 percent increase over 2013.

According to the Indonesian Textile Association (API), the gradual economic recovery of the U.S., Indonesia’s biggest market, is buoying textile exports. For the first two months of 2014, Indonesian textile exports were valued at $697.5 million, according to the Ministry of Trade. In 2013, exports totaled $12.68 billion, a 1.76% increase year-on-year.
Ade Sudrajat Usman, chairman of the API, said that a resurgent E.U. also accounts for the positive outlook. Indonesia is currently in negotiation with the E.U. regarding a free trade agreement that some estimate could triple the nation’s export industry in just five years’ time. Domestic textile sales are expected to leap 7 percent year-on-year to approximately $7.5 billion.
While many consider Indonesia a rising star in textile manufacturing, its progress has been stalled by persistent challenges, especially its recurrent electricity shortages, only exacerbated by a government plan to raise electricity tariffs. Currently, the government intends to raise electricity prices by a startling 38.9% for all businesses that use medium-voltage power, which includes apparel and footwear producers. The price hike should go into effect on May 1.
Also, while its massive supply of low-cost labor has been a point of attraction for Western retailers, low wages have ignited civil unrest, with workers taking to the streets in huge numbers protesting their alleged exploitation. Only several months ago, twelve province governors were compelled to increase minimum wages by an average of 19 percent in response to persistent strikes that were stymieing business. In 2012, there was a similar adjustment of the salary structure, raising the minimum wage by as much as 40 percent, depending upon the province in question. This pegs the minimum wage somewhere between $80 and $160 dollars per month in Indonesia, compared to $75 in Cambodia, a fierce competitor.
Indonesia also faces stiff competition from China and rival ASEAN nations, and has found China’s fiber, textiles and garment exports particularly difficult to counter, especially after the passage of CAFTA. These disadvantages have only been exacerbated by inadequate sovereign marketing. According to the Global Business Guide of Indonesia: “Branding and marketing of Indonesian made textiles has been conducted poorly in the past and domestic brands have not taken a strong footing among Indonesian consumers. Foreign apparel brands have flourished in the upper end of the market as have the imports of cheap garments from China that are on trend. With a reorientation of the sector toward higher quality goods and greater focus being placed on innovation and creativity; Indonesia has a strong base for further developing its textile garment, textile and fibre industries.”
Finally, Indonesia’s breakneck growth has made it difficult for its textile machinery and technology to keep pace with prevailing manufacturing standards. Some industry experts estimate that more than 70 percent of its textile machinery is technologically outdated. The problem has become so widespread the government initiated an ambitious textile machinery restoration program intended to modernize its aging technology.
The good news is that Indonesia is population-rich, blessed with 260 million people, giving it deep reserves of potential labor. Also, it largely has an investment-friendly business environment and laser-like focus on textile and garment production. The government has also demonstrated a twin commitment to political reform and infrastructural modernization. Especially if it can successfully negotiate a comprehensive trade agreement with the E.U., Indonesia is on track to become a viable sourcing alternative to ever more expensive China and politically fraught Bangladesh.
(Sourcing Journal)
Toray investing billions in Southeast Asian fiber, textile ops

Toray Industries will spend billions of yen to fortify its fiber and textile business in Southeast Asia, upgrading facilities in Indonesia, Thailand and Malaysia to produce highly functional fiber and adding or building sewing bases in Myanmar, Cambodia and elsewhere.

With the push, Toray plans to achieve its long-term goal of generating 1 trillion yen ($9.7 billion) in sales and 70 billion yen in operating profit in the textile segment in 2016, four years ahead of schedule, President Akihiro Nikkaku said Wednesday in an interview.
For this fiscal year, the fiber and textile business is expected to see an 18% sales gain to 750 billion yen, boosting its operating profit 27% to 55 billion yen and contributing to strong companywide results.
Toray will upgrade synthetic-fiber facilities in Indonesia, Thailand and Malaysia by fiscal 2016 for the purpose of manufacturing highly functional fiber previously made in Japan. These perspiration-absorbing, quick-drying fabrics are generating "strong demand among major sporting goods makers in the U.S. and Europe," Nikkaku said, adding that Toray aims to mass-produce them in Southeast Asia.
The firm is also considering building a fiber mill in Asia in fiscal 2017 or later, possibly in Bangladesh, where Toray has a sewing and dyeing facility, Nikkaku noted.
For the apparel business, group unit Toray International will open sewing facilities in Myanmar and Vietnam and is considering setting up shop in Cambodia and Laos. It will also step up outsourcing to local sewing companies, ensuring stable supplies to clothiers in the U.S. and Europe as well as in its home market.
(Source: Nikkei Asian Review)
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