Influence of FIFA World Cup Football Brazil 2014 on Indonesian Exports

For full 2014, exports of Indonesian textile and textile products are expected to reach USD $13.5 billion, a seven percentage point growth (year-on-year) compared to 2013. As such, this industry is an important (manufacturing) asset for the economy of Indonesia. In 2014, the textile and textile products industry is estimated to account for 10.7 percent of total Indonesian non-oil & gas exports. The positive influence of the World Cup is also visible in the three percent rise of production of polyester fiber in Southeast Asia’s largest economy. Orders started to rise at the end of the first quarter of 2014 and have continued into the second quarter.

But it is not only confined to the influence of the FIFA World Cup. Indonesia’s legislative (9 April 2014) and presidential (9 July 2014) elections have also given a boost to (local) T-shirt demand.

In 2013, Indonesia exported textile and textile products worth USD $12.6 billion. Garments accounted for 58.2 percent of these exports (USD $7.4 billion), threads for 19.1 percent (USD $2.4 billion), fabrics for 14.2 percent (USD $1.8 billion), fiber for 4.4 percent (USD $560 million) and other textile products accounted for the remainder.

Indonesian Textile Industry

	2010	2011	2012	2013	2014
Export in USD billion	10.8	13.2	12.4	12.6	13.5

^{Source: Indonesian Textile Association (API)}

Indonesia is one of the important production hubs for global brands Nike and Adidas. General Chairman of the Indonesian Textile Association (API) Ade Sudrajat confirmed the positive effect of the FIFA World Cup 2014 on Indonesian exports of textile and textile products (particularly due to the demand for jerseys of participants in the world cup). Sudrajat said that in the January to May 2014 period, exports of textile and textile products grew USD $500 million to USD $4.8 billion (from last year’s performance over the same period). New orders mainly stem from large garment companies, which send the jerseys to Europe and Latin America, where demand for jerseys is greatest.

Sudrajat further stated that Indonesia should have benefited more from the surge in global textile products demand. The value of exports could have reached USD $1 billion between January and May 2014, provided that the competitiveness of the Indonesian textile sector was adequate. Currently, however, a country such as Vietnam - where production costs are lower - receives more orders. For example, the recent higher electricity tariffs in Indonesia erodes competitiveness, while logistics costs remain high due to troubled infrastructure.

Increased local production of jerseys and T-shirts also boosts other industries. For example the production of filament yarn has increased by 5 to 7 percent. Meanwhile, production of synthetic fibers is expected to grow to 700,000 tons in 2014, from 585,000 tons in 2013 (current production capacity of synthetic fiber in Indonesia is estimated at 800,000 tons per year).

Future Perspectives of the Indonesian Textile Industry

Exports of Indonesian textile and textile products are expected to increase to USD $75 billion by the year 2030 (from USD $12.6 billion in 2012). This implies that Indonesia’s global market share will rise from 1.8 percent in 2012 to 5 percent by 2030. Due to the promising perspectives of the sector, the government has agreed to join the multilateral Trans Pacific Partnership (TPP), which is expected to boost Indonesian textile products exports, particularly to the USA. In fact, total textile exports are expected to increase threefold in the next five years. The government is still waiting for approval to participate in a Free Trade Agreement between Indonesia and Europe. This agreement would open possibilities for higher Indonesian textile exports to Europe.

The most important export destination countries for Indonesian textile products are the USA (worth USD $4.1 billion), followed by Japan (USD $1.2 billion) and Turkey (USD $620 million).

Domestic consumption of textile products in Indonesia is expected to rise from USD $7 billion in 2013 to USD $7.5 billion in 2014. This growth is supported by general economic growth, an expanding population and the elections in 2014.

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