APSN Banner

Indonesia's textile sector needs special attention amid US-China trade war, industry group says

Jakarta Globe - August 20, 2019

Nur Yasmin, Jakarta – Indonesia's textile industry entered 2019 with high optimism, following healthy growth in the preceding year.

The sector, which according to Central Statistics Agency (BPS) data expanded 8.73 percent in 2018, is one of the country's five industry mainstays on the Making Indonesia 4.0 Roadmap. It makes a major contribution to the national economy in terms of job creation and exports.

But this upward trajectory is now far from certain as the ongoing trade war between the United States and China escalates and chokes export demand.

Amid concerned over the industry's future, Indonesian Textile Association (API) chairman Ade Sudrajat suggested that the government formulate a strategy to overcome the negative impact the trade war may have on the economy.

"No matter what, the US-China trade war has a negative impact on developing countries. We should not die out, and to do so, the government must implement clear policies," he said.

Ade suggested three important steps to ensure that the industry remains healthy.

"First, we must keep our domestic market on high alert for potential fallout from the trade war. We must ensure regulations do not hamper or create difficulties for industry stakeholders," he said.

"Second, we must expand outside our traditional markets, to areas such as the Middle East, Africa and Latin America," he added.

Ade said Latin America was a good prospect and noted that Indonesia had already agreed to a trade deal with Chile.

"Thirdly, businesses must use their market access as far as possible; don't be inactive; be aggressive," he said.

According to the API chairman, the textile industry has been doing fine so far. Indonesia's textile exports have increased for three consecutive years, to $13.3 million in 2018 from $12.8 million in 2017 and $12.3 million in 2015. Ade believes this may rise to $15 million this year.

"Our strongest exports are garments. But the biggest obstacle to that is the need to import raw materials. But now we are looking into [locally produced] rayon fibers," he said.

Asia Pacific Rayon (APR) leads the cellulose fiber industry in Indonesia. The company has its own plantations in the country, which supply the raw material, eliminating the need for imports. The company also has potential to expand its rayon exports to new markets.

"Businesses must learn about trade missions [to other countries]. APR could go to Chile, for example, and introduce its rayon there," Ade said.

With falling prices of Chinese products, the company may face tighter competition. However, Ade said APR could offer semi-finished materials to China.

"There is no problem with China. By doing this, APR could increase its exports and production capacity," Ade said.

APR has invested in the construction of a viscose rayon factory with an annual production capacity of 240,000 tons. The company has been exporting its products to 14 countries since the start of operations early this year.

The countries are Turkey, Pakistan, Bangladesh, Vietnam, Mauritius, Sri Lanka, Nepal, Brazil, Germany, Portugal, Italy, the United Arab Emirates and India.

Source: https://jakartaglobe.id/context/indonesias-textile-sector-needs-special-attention-amid-uschina-trade-war-industry-group-says