Manufacturers of machinery and supporting equipment for the textile and garment industry from a number of countries participate in the Indo Intertex 2017 textile and garment industry exhibition at the JI Expo Kemayoran, Jakarta, Wednesday (19/4/2017).
JAKARTA, KOMPAS – The positive trend in the textile industry must be supported by efforts to boost competitiveness. In addition to strengthening upstream businesses, fresh investment is also needed to rejuvenate production facilities.
After suffering negative growth of 0.09 percent in 2016, the country’s textile and textile products (TPT) industry grew 3.76 percent in 2017.
According to Industry Ministry data, the TPT industry further grew 8.73 percent in 2018 due to increased demand in both domestic and foreign markets. However, the industry still depends on imported raw materials.
Indonesian Textile Association (API) executive secretary Ernovian G. Ismy said in Jakarta on Wednesday that the majority of raw materials for producing special textile products were still imported.
He said some companies produced textiles for civil engineering applications that had relatively large markets. These products included fabrics used in public projects such as paved roads, artificial embankments, airport runways, beach reclamation and roads constructed on loose soil.
"Some API members have imported 17 raw material items for geosynthetic production. Only 25 percent of these raw materials are procured from the domestic market and the rest are imported," Ernovian said.
TPT businesses have asked the government to continue its restructuring program for industrial machinery, especially for dyeing, printing and finishing. According to Ernovian, upstream textile sectors like polyester production needed strengthening to overcome the constraints of raw material supplies.
University of Indonesia economist Faisal Basri said that investment should focus on the upstream sector to increase competitiveness. The industry was not very competitive because it imported a large amount of raw materials, such as cotton and petrochemicals.
The Industry Ministry will focus on boosting the capacity of the upstream sector in the next three to five years in synthetic fiber production through means such as establishing cooperation or attracting investment to build factories that can produce quality fiber products.
Incentives
Finance Minister Sri Mulyani Indrawati said that the government was preparing fiscal incentives such as reduced income taxes for companies conducting technology research and development. Details on the incentives are still being formulated. "We are using the state budget to encourage industries to increase their efficiency," she said.
The ministry’s Industry 4.0 roadmap contains five priority industries: the chemical, TPT, electronics, automotive, and food and beverage industries. Sri Mulyani said that fiscal incentives were being offered to reduce industries’ dependence on imported raw materials and to improve their export competitiveness.
Tax incentives will also be offered to private companies and state-owned enterprises that invested in vocational education. The reduced income tax facility was intended to cover the training costs, establishing vocational education and training centers, and providing practical tools to vocational schools.
Beyond wages
The growing number of textile factories relocating to Central Java indicates that the industry still had high development potential. Central Java was a preferred destination among manufacturing companies partly due to relatively lower wages, efficient licensing procedures and good infrastructure.
Indonesian Entrepreneurs Association (Apindo) Central Java chairman Frans Kong said factories were relocating to Central Java not just because of low wages, but also for the province’s more conducive investment climate, especially concerning industrial relations.
Ease of doing business like smoother licensure was also another factor that attracted textile companies to relocate their factories to areas Central Java such as Semarang city, Semarang regency, Salatiga, Boyolali, Jepara, Sukoharjo, Solo, Sragen, Pekalongan, Batang and Pemalang.
API Semarang chairman Agung Wahono said the trans-Java toll road connected most of these regions. In addition to good road infrastructure, the private sector was also interested in developing an integrated industrial zone in the province.
CEO Iwan Setiawan Lukminto of publicly listed textile company PT Sri Rejeki Isman (Sritex) said that the national textile industry could be developed further, as broad opportunities were available in both domestic and foreign markets.
Iwan said that the textile industry was not a sunset industry because people wore clothing every day. "Many say it is a sunset industry because many factories have closed down. There are many challenges, but with efficiency and innovation, the industry can certainly survive," he said.
Demand was believed to being growing alongside economic growth. Many export opportunities were also available. "Sritex\'s 2018 exports were 56-58 percent. It is projected this year to increase to 58-60 percent," he said. (CAS/KRN/MED/IKI/TAM/RWN/WHO
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