INDONESIAN TEXTILE ASSOCIATION ASOSIASI PERTEKSTILAN INDONESIA Adhigraha Bldg. 16 th fl. Jl. Jend. Gatot Subroto, Kav. 56 Jakarta 12950 – Indonesia Tel. 62-21 5272171, Fax. 62-21 5272166 E-mail : [email protected], c [email protected][email protected]Website: www.indonesiatextile.com Performance of Textile Industry 2007 and Forecast in 2008
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INDONESIAN TEXTILE ASSOCIATION ASOSIASI PERTEKSTILAN INDONESIA Adhigraha Bldg. 16 th fl. Jl. Jend. Gatot Subroto, Kav. 56 Jakarta 12950 – Indonesia Tel.
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Number of Unemployment (million people)**** 9.80 10.70 11.70 12.70
Number of Poverty (million people)**** 36.20 35.10 39.05 45.70
• The economic growth is still reduced by inflation and society purchasing power has yet to grow.
• No spreading out of economic growth (still focusing on the non-intensive labor sectors); thus it has yet to reduce unemployment and poverty.
• Performance of the real sectors (trade balance) are still hampered, and it has yet to be able to give good impact on the economic growth.
Source : BI*, BKPM**, BPS***, Lipi**** procecced
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Domestic and World Textile ConsumptionBUSINESS CONDITION 2007
Total People Consumption * US$ 268,17 billion
Finished Clothes Cons. (2,5%)** US$ 6,71 billion
Volume conversion (US$ 5,5/kg)** 1.220.000 ton
Indonesia Textile Consumption
1013
1220
836882820
0
200
400
600
800
1000
1200
1400
2003 2004 2005 2006 2007
Domestic Finished Clothes Consumption 2007 (Est.)
Source: BI*, BPS** processed
• By value, finished clothes consumption declined but by volume the domestic consumption increased. Consumption per capita reached 5.3 kg (in 2006: 4,6kg/capita)
World Textile Consumption (million ton)
4748.2
49.4
54.4
56
42
44
46
48
50
52
54
56
58
2003 2004 2005 2006 2007
Source : WTO, Otexa, Eurotex processed
• World consumption increased by 3%.
• World consumption per capita in 2007 about 8,48 kg (in 2006: 8,37kg/capita)
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National Textile Production &Model of Distribution 2007 (000 ton)
PERFORMANCE OF TEXTILE INDUSTRY 2007
Indonesia Textile Export (by region), 2007
(US$ 10,06 billion)
US43%
EU16%
Row36%
Japan5%
Production : 800 Export: 220(27,5%)
Impor : 705
Fiber :
Production: 1680 Export: 800(47,6%)
Import: 90
Yarn:
Production: 970 Export: 320(32,9%)
Import: 110
Fabric:
Production: 410 Export: 380(92,6%)
Import: 20
Garment :Production : 120 Export: 110
(91,6%)Import: 68
Other Products:
Production: 230
SMEs Garment :
DOMESTIC MARKET (Total Sales: 358.000 ton worth US$ 1,97 billion)
Source: API (processed)
•Indonesia is still relying on export market by USA, EU and Japan as the main export destination country.
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Trade Performance (Export-Import)
Indonesia Textile Trade (US$ billion)
6.8
8
7.0
3
7.6
4 8.6 9.
45
10.0
6
1.8
2
1.6
7
1.7
2
1.6
1
1.5
8
2.0
5
5.0
6
5.3
6
5.9
2 6.9
9
7.8
7
8.0
1
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2002 2003 2004 2005 2006 2007(est)Total Export Total Import Balance
Sub-Sector Export Import
Value (US$ billion) Volume (000 ton) Value (US$ billion) Volume (000 ton)
Net Export : US$ 8,01 billionDom. Sales : US$ 1,97 billionInvestment : US$ 0,33 billion Total : US$ 10,31 billion
GDP 2007 : US$ 423,69 Milyar
INDONESIA TEXTILE TRADE BALANCE(US$ billion)
Pulp dan paper13.37%
Oil palm16.10%
Rubber products17.92%
Furniture7.90%
Shoes & Leather products
5.16%
Textile24.33%
Non-oil1.67% Other
6.87%
Mining products
6.68%
SHARE SURPLUS OFINDONESIA TRADE 2007
(TOTAL US$ 39.92 BILLION)
Manufacture
12%
Agriculture44%
Other18%
Retail, Restaurant
& Hotel20%
Mining1%
Construct5%
SHARE OF WORKER IN TEXTILE INDSUTRY AGAINST THE NATIONAL INDUSTRY
(97,58 MILLION)
15%Textile & Garment
(1,841,520)
• Biggest foreign exchange earner from non-oil sector (2,4% to GDP)
• Export surplus is always above US$ 5 billion annually• The biggest absorber of workers in manufacturing industry
PERFORMANCE OF TEXTILE INDUSTRY 2007
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TEXTILE BUSINESS CLIMATE 2008/2009:CHANCE, CHALLENGE, OBSTACLE AND
WORKING AGENDA IN TEXTILE INDUSTRY
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National & World EconomicBUSINESS CLIMATE FORECAST 2008/2009
If target of 6.8% economic growth in 2008 can reachable and inflation can be reduced by 5%, the society’s purchasing buyer would increase. At any rate, government must focus on the sector driven to increase the economic growth. If not focusing on the increase of the manufacturing sector, the economic growth would be in appearance only since it cannot reduce number of unemployment and poverty.
Along with the increase of the world crude oil price reached to about USD 100/barrel, the world economic is expected to slow down. It will impact on the growth of trade volume and value (export-import. The decline of growth in the importing countries will also make the trade dropped.
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Textile Consumption & Supply-Demand
Indonesia Textile Consumption
(000 ton)
1,3001,2201,013
836
0
500
1000
1500
2005 2006 2007 2008
• Optimistic assumption, if government can increase society’s purchasing power, the textile consumption will grow to about 1.3 million ton in 2008.
The World Textile Consumption (million ton)
49.4
54.456 56.5
45
50
55
60
2005 2006 2007 2008
Source: WTO, Otexa, Eurotex processed
• Despite not significant, the world textile consumption is predicted to remain grow and would be 56.6 million ton in 2008 by USA and EU as the main market.
BUSINESS CLIMATE FORECAST 2008/2009
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World & Domestic Textile Market
The World Textile Trade (US$ billion)
0
200
400
600
800
2001 2005 2006 2007 2008est
2009est
Textile Clothing
• Despite consumption grows, the illegal import will disturb market share of local products in domestic market. For that, share in the domestic market is predicted to remain under 25%.
• Growth of the world textile consumption will impact on the trade value. In 2008, the world textile trade will reach to US$ 565 billion.
• China and India are still dominating world textile trade. China will be free from the safeguard measure and to be member of WTO. Indonesia will face other potential competitor such as Vietnam and Kampuchea those get rapidly growth in the garment industry.
BUSINESS CLIMATE FORECAST 2008/2009
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To increase competitiveness in the domestic and export, the government should focus on:
• Having trade cooperation (FTA) with the countries to be main export destination like USA and EU, like with Japan (IJ-EPA).
• Activating ITPC as marketing agent of the national industry in cooperates with related associations relating to the effort to have market penetration.
• Facilitating promotion like exhibition and other promotional activities in the countries to be main textile export destination, such as Textile World (EU), Magic Show (USA), ITAF, IFW, etc.
• Handling problem of unfair trade competition, in which import goods can be easily imported and circulated to the domestic market.
BUSINESS CLIMATE FORECAST 2008/2009 World & Domestic Textile Market
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Investment & Machinery Modernization
• Despite banking is still focusing on the government obligation savings; however, some banks begins allocating funds to the textile industry.
• Program of Increasing Machinery Technology in the textile industry drive textile manufacturers to modernize machines and expand production capacity. In 2007, the investment increased to US$ 300 million. This investment will impact on the performance of textile industry in the future.
• In 2008, it is expected that there would be increase of investment of more than US$ 500 million. The fund is allocated to modernize machines in the sectors of spinning and weaving and increase production capacity in knitting, finishing, and weaving.
Restructuring/Modernization
- 2.5 million spindle- 200,000 shuttle loom
Expansion
- 20 Man Made Fibre unit- 2.4 spindle- 63,500 shuttle-less loom- 16,600 knitting mach.- 221 finishing unit- 179,000 sewing mach
• The energy supply from PLN has yet to meet the industry’s demand.
• The electricity base rate (4 cent/kwh) is competitive enough, but the applied rate (due to peak season program, multiuse, public lighting and VAT) makes no longer competitive (8 cent/kwh).
Benchmark Average Applied Electricity Rate For Industry 2005 (cent/kwh)
Indonesia : 8 China : 7,6 Bangladesh : 3 Mesir : 3 Pakistan : 6,6 Vietnam : 7
Source : World Bank, ASEAN Sec, API Compiled.
Energi Supply In Textiles Industry 2010
PLN (State Own)30%
Fuel Own Power Plant5%
Gas & Coal Own
Power Plant65%
Energi Supply In Textiles Industry Before 2005
PLN (State Own)90%
Fuel Own Power Plant7%
Gas & Coal Own
Power Plant3%
Energi Supply In Textiles Industry 2006-2007
PLN (State Own)75%
Fuel Own Power Plant6%
Gas & Coal Own
Power Plant19%
Source : API Compiled
Textile industry has begun doing energy diversification by building private power plant using coal and gas as fuel source
BUSINESS CLIMATE FORECAST 2008/2009
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Giving priority to primary energy (gas and coal) to meet the domestic energy demand.
Supporting industry to have energy diversification by making sure continuity of gas and coal supply to the industry.
Increasing efficiency for the PLN performance and building new power plant using domestic source of primary energy; thus it can meet industry’s need by competitive price.
Government should focus on:
BUSINESS CLIMATE FORECAST 2008/2009 Availability of Energy Supply
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• The labor system cannot drive increase of workers’ productivity; thus it declines competitiveness.
• The Act No. 13/2001 especially for minimum wage, outsourcing, overtime, and severance pay, is still burdening industry (un-friendly business policy).
• The Work Training Center has yet to be maximally used to increase workers’ productivity.
Average Cost for Labor 2007 (US$/hour)
Indonesia : 0,76 China : 0,55 Vietnam : 0,35India : 0,60 Pakistan : 0,40 Bangladesh : 0,35
Labor Productivity Rank 2005Thailand : 27 Malaysia : 28 Korea : 29China : 31 Filipina : 49 Indonesia : 59
Source : Min. Of Labor compiled from any other source
Company does training to increase workers’ productivity, either done internally or makes cooperation with the training
institutions
LaborBUSINESS CLIMATE FORECAST 2008/2009
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Revising the Act No. 13/2001 mainly in minimum wage, outsourcing, overtime, severance pay to make business more and more favorable.
Reactivating Work Training Center (BLK) as training institution to increase workers’ skill and productivity.
Supporting training and education centers to increase workers’ productivity. The centers can make cooperation with industry in arrange model of training and education.
Labor
API in cooperates with government should focus on:
BUSINESS CLIMATE FORECAST 2008/2009
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• The THC rate is more expensive compared to the ASEAN countries.
• Access to seaports damage and traffic jam (cost and time of transportation is more and more increase).
Terminal Handling Charge Rate (US$)
Country2004 2005
20 feet 40 feet 20 feet 40 feet
Indonesia 150 240 97 150
Singapore 110 160 110 160
Philippine 78 N/a 78 N/a
Malaysia 76 N/a 76 N/a
Thailand 40 N/a 40 N/a
Source: Indonesian Shipowner Association (DEPALINDO)
Infrastructure
High-cost economy in transportation sector (from, in and to the seaports):
BUSINESS CLIMATE FORECAST 2008/2009
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Increase productivity and efficiency of the seaport performance to make quicker services and reduce THC of 20-feet under US$ 70/container and 40-feet under US$ 100/container.
Improving access from and to the seaport to reduce traffic jam.
Drive investment in transportation sector (train) from industrial estates to the seaport. It will make transportation faster, safer and more competitive price.
Infrastructure
To handle the problems in infrastructure, API and government should focus on:
BUSINESS CLIMATE FORECAST 2008/2009
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TARGET OF THE TEXTILE INDUSTRY 2008:By above estimation and forecast, performance of the textile industry in 2008 is targeted:
Investment aimed at modernizing and expanding production will increase 5% of production capacity; thus, the production utilization is targeted to be above 80%.
By new investment, it is expected there would be growth by 5% of number of workers.
Import growth in the US, IJ-EPA and AJ-EPA, correction of the RMB value against the USD, political condition in Pakistan, industrial growth of home textile in Asia, and accurate promotional strategy are expected to drive growth by 10% of export.
The domestic market will be difficult to reach. At any rate, if the national textile industry can seize market share of uniform, the local products are expected to dominate 60% of the domestic market.
---- T H A N K Y O U ---
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Forecast of textile export by sub-sector in 2008 as follows: