Robert Go, Jakarta – First it was shoemakers, toy makers and leather workers. Now it is the turn of the textile producers to complain that theirs is an industry choked by Indonesia's inability to compete against Asian countries like China and Vietnam.

The story is similar: Orders are coming in from foreign buyers, but local manufacturers can't beat the steep discounts offered by their competitors elsewhere. The result, said experts, is an industrial sector that sees dwindling profit margins and its own demise within the next few years.

Mr Natsir Mansyur, a division chairman of Indonesia's textile-producers association API, said: "We have never had it so bad. Competition from producers from China or Vietnam is very stiff. Buyers say they get better prices elsewhere."

Over the last few years, the textile industry – like many other sectors in Indonesia – has seen exports drop amid weaker demand from the global market and tough competition from foreign manufacturers.

Textile exports from Indonesia amounted to US$8.5 billion in 2000, but plunged to US$7.2 billion last year and is expected to drop by another 10 per cent this year.

During the first four months this year, central-statistics bureau BPS said, Indonesia sent out only US$2.26 billion worth of cloth and ready-to-wear garment items, a drop of nearly 15 per cent compared to last year's figures.

Senior government officials played down the declining exports by saying that other developing economies in the world, except for perhaps China, are seeing the same trend of declining export for non-oil-and-gas sectors, including textile.

But industry players here argued that some government policies, for instance on labour and energy, make production costs higher and Indonesian manufacturers less competitive.

The 1,200 registered textile companies here, which altogether employ more than a million workers, also have difficulties upgrading their equipment and factories, due to the government's steep machine-import duties and other tax regulations.

Mr Indra Ibrahim, another top executive at API, had said that lack of policy coordination between different government ministries is a key problem.

"If only the different ministries could come up with solid policies that do not contradict each other," he said. "The way it is now, one ministry may reduce import duties on raw items, but another may hike workers' wages or electricity costs."

In addition to slowing exports, textile companies here also have to deal with a huge influx of cheap imported garments that often enter the country illegally.

Mr Natsir said: "This is yet another example of how the government just cannot get its act together. Many customs officials take bribes to allow cheap garments from China and other places to come in. This increases pressure on us domestically.

"We can't compete outside, but we are also getting beaten domestically. If the government doesn't act, Indonesia will lose its textile industry within a decade."