About 1.80 percent of global demand for textiles and textile products is met by Indonesian textile exports according to Indonesia's Ministry of Industry. The value of the country's textile exports is estimated at USD $12.6 billion. However - and in line with Indonesia's economic expansion - the ministry targets to meet four to five percent of overseas textile demand. The ministry asked the Indonesian Textile Association (API) to prepare a roadmap together for expansion.
Indonesia's textile and textile products exports grow about five to six percent annually. The country is inside the top ten of largest textile producing countries but needs to increase productivity as well as competitiveness ahead of the Asean Economic Community (AEC) that will be established in late 2015. The AEC will integrate the ASEAN region into a single market and production base and includes the free flow of capital and professionals within the region. In that context, Indonesia needs to boost many of its industries (including the textile industry) in order to remain or become a supplier instead of a consumer of the region's products.
Currently, a relatively high amount of machinery and components that are used to produce textiles in Indonesia are imported. The ministry stated that of the 2,900 textile companies that are active in Indonesia, more than 500 are dependent on foreign materials. The ministry wants to tackle this issue as it hurts the industry's competitiveness. For that reason, the government has provided a tax holiday for investments in the country's textile producing machinery and equipment industry.
Indonesia's most important textile export products are garments, fabric and yarn. Together these products account for over 90 percent of the country's textile exports. Important export destination countries are the United States, Japan, Germany and Turkey.
Only a few weeks ago the API revised down Indonesia's export target as the industry has to face increased electricity tariffs, gas prices and labour wages (although still relatively cheap compared to Japan, Malaysia and Singapore). To reduce production costs Indonesian textile buinesses are relocating outside the bigger cities on Java.
Indonesia's Textile Industry
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Source: Indonesian Textile Association (API)