Indonesia needs funds of up to Rp175 trillion (US$12.50 billion) to increase the competitiveness of the textile industry - Photo: BKPM.

JAKARTA (TheInsiderStories) – Indonesia needs funds of up to Rp175 trillion (US$12.50 billion) to increase the competitiveness of the textile industry – including garments – from upstream to downstream, said the head of the investment coordinating board Bahlil Lahadalia in a meeting with textile entrepreneurs in Jakarta on Wednesday (12/11).

“The funds include the revitalization of the engine. So we need Rp175 trillion in total, divided upstream and downstream. The machines have the most Rp75 trillion,” Lahadalia said in his office.

Revitalization will also occur in terms of regulations that support businesses, said Lahadalia. And certainty about the regulation has been conveyed to President Joko Widodo.

“We ask them which are the priorities and the President will look for a solution because this is a national problem, so we will classify which priorities will give the competitiveness,” he explained.

According to him, the textile industry including garment must be utilized as well as possible. The contribution of garment exports is so large and public consumption is also high. The textile industry was one of Indonesia’s largest earners of foreign exchange last year, with exports valued at $13 billion, marking a 5 percent increase from 2017.

“We know that lately there are many products from outside Indonesia that penetrate very extraordinary, until then when the market checks are full of imported products, none from Indonesia,” he said.

Months ago, Moody’s Investors Service rated that the United States (US) – China trade dispute could lead to an influx of Chinese yarn, fabric, and garments into Indonesia. It said, potentially disrupting the so far stable levels of demand and supply in Indonesia by pushing up supply, which would, in turn, depress prices and hurt local manufacturers.

Moody’s explains that tariffs imposed by the US on Chinese textile exports are at 25 percent versus the 10 – 15 percent that Indonesia has implemented.

Moreover, the country needs seven years to revitalize the industry from upstream to downstream, according to the textile association, Asosiasi Pertekstilan Indonesia (API). With this, it is estimated that Indonesia’s foreign exchange income will increase by 10 times.

“Within 12 years our foreign exchange will increase from $13.2 billion a year to $49 billion in 2030 with a net foreign exchange of more than $30 billion,” said API’s deputy chairman Anne Patricia Sutanto.

In addition, the president director of PT Sri Reject Isman (IDX: SRIL) Iwan Lukminto hoped the government would immediately harmonize regulations. Because, there are several problems that must be resolved, such as raw materials to technology.

“We must have progress, a lot of things related to the recommendations that we divide from the six points, first raw material, market, commercial, human resources, energy and technology and finally the environment. This is done so that we can export and our domestic is safe,” he said.

Indonesian textile exports are growing at a rate marginally faster than that of the country’s GDP, but the overall downward trend continues. The export value of Indonesian textiles and clothing products increased to $13.28 billion in 2018 from $12.54 billion in 2017 with a growth rate of 5.90 percent, according to API data.

The growth rate of the Indonesian textiles and clothing industry was higher than the country’s GDP growth rate of 5.17 percent in 2018. Exports of cotton and cotton products have been showing a consistent downward trend. Consequently, cotton imports have shown a slight increase and reached 772,929 metric tonnes in 2018-19.

The US-China trade tensions also have resulted in more Indonesian garments being exported to the US and more cotton imported from the US, the data showed. American cotton is still preferred over other varieties as it is of higher quality and more consistent.

Now, with the conclusion of the Indonesia-European Comprehensive Economic Partnership Agreement (IEU-CEPA) in 2019 textile exports to the European market are expected to increase, according to API.

US$1=Rp14,000

Written by Lexy Nantu, Email: lexy@theinsiderstories.com