Textile Sector Indonesia: Demand Down, but Exports Rise

A small 0.62 percent year-on-year (y/y) growth was detected in Indonesia’s textile exports in the first half of 2017. This modest growth was supported by a 20.4 percent (y/y) rise in knitwear exports. Ade Sudrajat, Chairman of the Indonesian Textile Association (API), said Indonesia’s downstream textile manufacturers were actually pleased with this result as it exceeds expectations amid bleak textile demand from various countries.

Amid bleak global economic conditions many countries have reduced imports of textiles and therefore this modest growth in the first half of 2017 is actually a positive matter, one that provides a glimmer of hope that the situation will change for the textile sector.

Data from API show that Indonesian textile exports to key markets have declined. Shipments to the USA fell 3.6 percent (y/y), to the European Union by 4.0 percent (y/y), and to Japan by nearly 5 percent (y) in the January-June 2017 period.

Sudrajat said the apparel (fully made clothes) trade balance of Indonesia has improved markedly since the start of the year as the government has discouraged cheap imports into Indonesia to protect local industries. Meanwhile, more than 50 clothes factories have been relocated to Central Java where they started using more efficient technology and therefore their output is more competitively prices on the world market, hence boosting demand.

“Improved competitiveness (in terms of price and delivery) explains why demand is negative but Indonesian exports are positive,” Sudrajat explained. “Moreover, foreign importers may now be more confident in Indonesia’s economic and political stability.”

Based on data from Indonesia’s Industry Ministry, the textiles and textile product sector contributed USD $11.87 billion in terms of foreign exchange earnings, or 8.2 percent of Indonesia’s total export earnings in 2016. Meanwhile, investment in this sector reached IDR 7.54 trillion (approx. USD $567 million) in 2016.