Mohammad Ishaque, Research Assistant, Textile Focus

image001Indonesia is among the top 10 textile & apparel producing countries in the world and 12th among leading textiles & apparel exporters in the Association of Southeast Asian Nations (ASEAN) region. It is playing a vital role in the country’s economy, contributed by $13.8 billion export earnings in this year.

According to Indonesia’s Industry Ministry, the textile industry is one of Indonesia’s largest earners of foreign exchange, with exports value $12.8 billion last year, rose by 4.9% from 2017.

Textile Export from Indonesia
Chart-1: Textile Export from Indonesia in Bn USD

From chart-1, it is seen that Indonesia’s textile exports have increased $13.8 billion in 2019 from $12.8 billion in 2018 & that’s estimated to reach $15 billion in upcoming year.

According to the Indonesian Textile Association (API), the Indonesian textiles industry is expected to grow at a compound annual growth rate CAGR of 5.09 per cent in terms of revenue during the forecast period of 2018-2023.

The garments and textiles industry in Indonesia is expanded in the global textiles market, with the revenue, reaching to $39.22 billion & 8343.76 kilo metric ton, by volume, with a CAGRs of 5.74 per cent, generated per person revenues $66.91 in 2019.

Chart-2: Textile Industry Market Value in Revenue and Volume
Chart-2: Textile Industry Market Value in Revenue and Volume

The chart-2 has shown that the Indonesian textiles industry is growing day by day & it’s expected to reach $51,967.92 million, by revenue, with CAGR 5.79 per cent & 11030.61 kilo metric ton by volume in 2024.

According to the Indonesian Textile Association (API), in 2019, Revenue in the Apparel market amounts to $18,107 million & the market is expected to grow annually by a CAGR 5.4 per cent in between 2019-2023.

In global comparison, most revenue is generated in United States, were valued at $348,300 million & the market’s largest segment is the segment Women’s & Girls’ Apparel with a market volume of $7,311 million in 2019

However, the domestic & global market for the sector has been expanding significantly in recent years as capital has risen and spread and contributed 2.3% to the world GDP.

screenshot-27The authority expects to increase Indonesia’s textile and apparel product’s share in the global market, by reaching 5% in 2030.

The United States still remains the biggest market for Indonesian textiles, about 36% followed by the Middle East 23% & the EU 13%. And as a partner country of the TPP agreement, exports from Indonesia to USA is on the rise.

The industry has become more competitive in both the domestic and international markets, referring to last year’s growth rate of 8.75 %.

However, Indonesia’s textile industry has entered in the year with high optimism, which’s subsequently followed by steady growth but the ongoing trade war between the United States and China may present some obstacles.

The US-China trade war will have a negative impact on developing countries, no matter what. To survive the textile industry should need clear policies.

Moreover, Indonesia must also diversify its export markets to improve its security against the economic turmoil being witnessed in China and the US. Currently, a number of textile manufacturers have already tapped into new, potential overseas markets such as Australia, New Zealand, Japan, and South Korea which show great potential for the future.

Whatever, these developments have made the domestic market an attractive sight for foreign suppliers. As well, the government is encouraging foreign investment, and has set targets to increase the industry’s share of global textile and apparel (T&A) markets.

However, the world’s fourth most populated country not only exports T&A, but also imports citable amount of T&A from different countries. Indonesia imports value for T&A was worth $8.566 billion in 2014, according to WITS, though the chemical, industrial & fuel products sector has contributed 33% to the total export earnings in 2018.

Indonesia Textiles Industry is expected to record a CAGRs of 5.74 per cent during the forecast period 2019–2024. According to BKPM, Nearly, $759 million was invested in Indonesia’s textile industry in 2017. Government has taken initiative to attract the foreign investment in the industry is likely to act as an opportunity in the future Indonesia’s competitiveness. Recently Indonesian President offers a new incentive to entrepreneurs (discount on income tax).

Meanwhile High dependency on imported raw material is considered to interrupt the growth of the market & it’s looking into locally-produced rayon fiber. As Indonesia’s government has reached a trade agreement with the EU to further improve the competitiveness of the country’s textile & apparel products & also offers tax holidays of up to 25 years and relax restrictions on foreign investment in its special economic zones.

The Indonesia, being one of the largest textile and apparel producers in the region, has a long tradition of producing and exporting Apparels and home fashion textiles but it leads to only about 2.3 percent of global markets share, where as China controls about 46.5 percent and Bangladesh controls 6.7 percent.

The industry is still facing the same problems within the last five years, the production and non-production aspects are still main problems faced by the industry to compete in the global market as like high production cost makes the prices of the national textile and garment products, not competition against products from other competitors.

Whatever, the Indonesian government target to increase the nation’s value of exported textiles and garments to achieve $75 billion by the year 2030 that’s industry would contribute around 5 percent to global export markets.

In order to achieve the target, the Indonesian government enhances its support to the garment industries. This includes improving law enforcement to curb illegal textile imports, accelerating industrial area development outside of Java to reduce logistics costs, and establishing vocational schools to prepare skilled human resources who are able to utilize new technology in the sector.