Footwear, textiles and textile products may be seen as industries of the past, or sunset industries, but the fact is they are the backbone of our exports and domestic economy.
Those who see these as sunset industries may be right in the sense that our footwear, textiles and textile products are losing out to new players from countries like Vietnam and Bangladesh.
Exports of textiles and textile products have been relatively constant at between US$7 billion and $8 billion a year since the late 1990s. Indonesia's footwear industry is faring even worse, with exports plummeting from $2.2. billion before the economic crisis to $1.6 billion last year.
However, if we look at their roles in the country's economy in general, these industries remain significant, both in terms of contribution to gross domestic product and employment; therefore, they need our support to regain their former glory.
Look at textiles. Export figures for textiles and textile products have remained constant at a high of $8 billion a year. Moreover, their net contribution to foreign exchange is also significant. In 2005, for example, the industry contributed $7 billion in net foreign exchange income to the country – from exports of $8.6 billion minus imports of $1.6 billion.
The industry also directly employs a total of 1.8 million people. If we include those indirectly employed by the sector, the number would jump to six million, half of whom work in garments, a significant number for a country in dire need of employment.
The footwear industry also makes a significant contribution to the country's economy, although on a smaller scale than textiles. In 2005, the industry contributed $1.4 billion from exports and about $1.9 from domestic sales, and it directly employed about 400,000 people.
These figures suggest the industries' roles in our economy cannot be ignored, especially in providing jobs. Moreover, according to the Indonesian Chamber of Commerce and Industry, these two are among the industries that could drive economic recovery toward 7 percent growth per annum. The other industries are electronics, automotive and fishery.
Therefore, we agree that we need to help these industries not only to maintain their operations, but to expand and improve their competitiveness.
The use of old machinery is one chronic problem in the footwear and textile industries. It is therefore clear that they need to restructure their machinery. The textile industry needs about $10 billion to update old machinery, while the footwear industry will need about $55 million to upgrade.
The government has promised to provide a subsidy to help the textile industry modernize machinery, and a similar facility has been sought by the footwear industry.
We support the good intentions of the government in providing support for the textile industry. But we would remind the government and also the public that such support is prone to abuse, apart from potentially upsetting other industries.
The government could better act as a facilitator for these industries, looking for sources of cheap funding and competitive machinery. This kind of support would not financially burden the government, which itself is in dire need of help.
The government also could extend direct support in the area of research and development. The government's direct spending for R&D has been dismally low compared to other countries in the region.
Indonesia spends just $300 million per annum for R&D, as compared to $1.2 billion in Malaysia, $1.5 billion in Singapore and $7.5 billion in China. If the government cannot increase its R&D spending, it can at least provide incentives for industries to increase their R&D budgets.
There are countless other areas were the government could provide support. Faster restitution of value added tax for export products, for example, is one. Faster restitution means additional cash flow for businesses.
For that matter, any faster service from government institutions would constitute a big help to businesses, including those in the textile and footwear industries. Faster customs service, especially for exports and imports of raw materials, and faster service at tax offices are good examples.
If the government could help businesses establish an insurance system for labor, that would be of major assistance, especially when companies are forced to lay off workers.
The bottom line is that support is urgent, especially if we want to make the country's footwear and textile industries more competitive.
As a nation, we need to support these two industries, and other competitive industries, to help them grow and expand and prevent them from becoming sunset industries.