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

Jakarta Globe - August 29, 2019

Jakarta – Indonesia's textile industry entered the year with high optimism, which was subsequently followed by steady growth throughout the year. But due to the ongoing trade war between the United States and China, Indonesia's textile industry is due to see some bumps in its trajectory.

Previously, the sector saw an 8.7 percent expansion in 2018, according to data from the Central Statistics Agency (BPS), and is one of the country's five industry mainstays on the Making Indonesia 4.0 Roadmap, set to create more jobs and become a big contributor to the country's exports.

Amid concerns over the industry's future, chairman of the Indonesian Textile Association, Ade Sudrajat suggested that the government formulate a strategy to overcome the impact of the trade war and said bumps might have on the economy.

"The US-China trade war will have a negative impact on developing countries no matter what. We [the industry] should survive, but in order to do so, the government must implement clear policies," Ade said.

Ade noted three points that the industry and the government must focus on in order to keep the industry going strong.

"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," Ade said.

"Second, we must expand outside our traditional markets, to regions like the Middle East, Africa and South America," he added.

Ade said South America had great potential and added that Indonesia already has an ongoing 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.

Viscose staple fibers (VSF) or artificial cotton fibers are natural and biodegradable. These fibers are obtained from wood pulp and cotton pulp, which share the characteristics of cotton fibers. These are versatile and easily bendable fibers and have a wide range of application in apparels, home textiles, home furnishings, dress materials, and woven & knitwear.

According to Fiber Organon, world demand for viscose is expected to increase by 7 percent to 8 million ton in 2020, four times bigger than 2001. Fibre2fashion predicts in 2023 viscose staple fiber consumption will increase significantly in Asia Pacific region with China recording the biggest potential growth by 6.1 percent, followed by India by 7.2 percent and Indonesia by 5.7 percent compared to 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. APR answers the global call for sustainability among the world's industries, including textile. As the fashion industry's demand for more environmentally friendly materials keeps increasing, APR has also made sure that all its rayon comes from renewable and biodegradable materials.

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.

Indonesia is currently one of the largest producers of rayon in the world. By keeping its rayon production domestic, APR hopes not only to help the local fashion industry grow, but also to reduce its reliance on imported raw materials.

"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.

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