Competition from China and India sparks textile crisis
China's invasion of the US market is causing particular concern. Firms are planning to move production to Cambodia and Vietnam and even to China itself.
Jakarta (AsiaNews/SCMP) The Indonesian textile industry is undergoing a crisis because of stiff competition from Chinese and Indian products, especially on the US market. Many firms are thinking of moving production abroad. As from 1 January 2005, the Multifibre Arrangement ended and products from India and China invaded the market to the detriment of other countries in South Asia. The textile industry employs 1.5 million people in Indonesia and accounts for 15% of national exports, excluding oil and gas. The United States absorbs around 30% of the annual output, but many clients are now buying from China instead.
Gunarata Danubrata, who has worked in his father' factory for 13 years, said: "We must reduce the number of Indonesian personnel and shift production to Cambodia." His firm has worked in Cambodia since 1997, and 35% of its output is produced there.
"Some of our members are investing in countries like Cambodia and Vietnam, where the workforce is cheaper and productivity higher," said Kevin Hartanto, member of the Indonesian Textiles Association's West Java chapter. "In Indonesia we pay more for less." In Indonesia, a worker receives 75 US dollars per month for a 40-hour working week while in the other two countries, workers take 45 dollars for a 48-hour working week. Other high costs stem from fuel and electricity costs, heavier taxes and import duties and widespread local corruption. These factors all discourage potential investors and push up prices. As a consequence, Indonesian exports have dropped, even before the liberalization of the textile market, from 8.3 billion dollars in 2000 to 7.1 billion in 2003.
Other firms are shifting production to China itself where they will find cheap labour and raw materials and an efficient distribution network for their products, especially if they deal with "niche" products, like baby clothes and brassieres, which have not yet been taken over by Chinese producers. Danubrata will open a factory in Fujian in March 2006.
The imposition of quotas in the US and European market has given the Jakarta industry some breathing space, but many fear the worst is yet to come. "China's prices are unbeatable and when there are no quotas, it will be able to catch 45% of the US mass textile market within three to five years. Indonesian products must compete with better quality, original design and materials," said Chatib Basri, director of the Institute for Economics and Research at the University of Indonesia and government economics adviser. He added that the government has promised to support the textile sector, to review labour regulations and to reduce taxes and other fiscal charges.
Some producers are extremely pessimistic. "My USA clients," said Hermanto Idira of Solo, which produces for the US market, "insist that I slash prices by 20 or 30% to compete with Chinese products, but my costs have increased since the government cut fuel subsidies. Now I must sell on the domestic market even if the economy is not expanding."
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28/09/2005
