Jakarta – Indonesia's textile exports to the United States and Japan fell in the first quarter of this year because of the slowing global economy, a consultant firm says.
Exports to the United States for the January to March period dropped by 0.38 percent to US$1.11 billion, from $1.12 billion in the same period of 2007, said Indotextiles (a textile and apparel community reference firm) director Redma Gita Wiraswasta.
"The United States reduced its textile imports from around the world during the quarter, to around $21 billion from $22 billion for the same period last year," Redma said, adding that the trend would "probably continue until the end of the year".
The United States imported around 37 percent of Indonesia's total textile products last year, making it the largest buyer. Indonesia's second largest buyer, Japan, also imported less in the first quarter, spending $142.2 million on Indonesian textiles – a 3.5 percent drop from the first quarter of 2007, Redma said.
"Japan is also being affected by the slowing of the global economy," he said. "However, the future for the Japanese market looks brighter (than the United States) following the implementation of the Indonesia-Japan Economic Partnership Agreement, this June," he added.
The agreement was signed last August by President Susilo Bambang Yudhoyono and then Japanese prime minister Shinzo Abe, to facilitate bilateral trade and investment relations.
"Once the agreement takes effect, all textile products made using Japanese or Indonesian fabrics will be eligible for a zero percent import tariff in both countries," Redma said.
Despite slower demand in the United States and Japan, Indonesia's total exports rose by 5.3 percent to $2.58 billion during the first quarter of this year from $2.45 billion in the same period last year, according to data from the central bank. This was due to higher demand in other parts of the world, including Europe.
Meanwhile, weaker consumption power as a result of soaring inflation had put a break on domestic demand as sales declined by 27 percent. Sales dropped to $160 million during the first quarter of this year, compared to $220 million for the same period last year. "Domestic sales were down because rising inflation was having a negative impact on people's purchasing power," Redma said.
Redma suggested textile firms focus on expanding their market penetration in Europe, to phase out declining sales in other parts of the world. He said "while domestic purchasing power won't recover for a while and neither will the US economy, the strengthening of the euro and the fast fashion cycle in Europe could help increase sales".
Indonesia's imports from other countries rose by 19 percent to $1.22 billion in the first quarter of this year, from $1.02 billion, but these were largely for reexport as processed products. (anw)