Indonesia Gains, while China Loses

The Indonesian textile industry may benefit from the global crisis as buyers from US, EU and Japan relocate US$648 million of orders from China.

Indonesian Textile Association (API) deputy chairman Ade Sudrajat said Tuesday that relocated orders could amount to a total of US$648 million -- equivalent to about 6 percent of Indonesian's $10.8 billion total textile exports in 2008.

“This relocation of orders is partly triggered by social instability with crime figures in China increasing due to the impact of the global economic crisis, which has caused big manufacturers to collapse and massive unemployment,” Ade told reporters Tuesday, saying “Trade and investment are sensitive to security.”

Ade said that the more stable social and economic conditions in Indonesia had attracted buyers to relocate their orders to this country.

Relocated orders would help to rapidly stimulate the textile industry and related activities, he said.

“The industry’s utilized capacity will soon increase from the current 67 percent … and exports are [now]expected to exceed $11 billion this year,” he said. Another positive effect of the transferred orders would be to reduce pending dismissals, while laid-off workers could be re-employed.

Indonesian Employers Association (Apindo) said that as many as 100,000 workers had been laid off in the textile and garment industry during the first months of 2009 up to the first week of March. However the Apindo estimate was higher than the figures given by government.

According to figures from the Manpower and Transmigration Industry, overall temporary and permanent layoffs for all economic sectors between January and April 17 topped 44,757 and 21,043, respectively. This would indicate that the private sector figures were more pessimistic, and perhaps more realistic, but also possibly based on different statistical criteria.

Ade also said Indonesia, Vietnam and Thailand – three big textile and garment exporters in Southeast Asia region -- planned to establish an ASEAN trade service alliance by the end of this year to boost the regional textile and garment trade and to provide a better service for buyers from outside the region.

He said the planned trade service alliance, would start with denim products and cut costs for buyers. “The alliance will create a system that integrate orders from upstream to downstream products for buyers,” Ade said, “The new system is on trial at the moment.”

With the integrated system, buyers will no longer need to have offices in countries where their orders are made, as is the current practice. "We cannot immediately involve all ASEAN countries because we need garment and textile manufacturers and buyers to voluntarily try out this new system,” said Ade.

“With the establishment of the alliance, Indonesia is targeting to raise its share of the inter-regional textile and garment trade from 7 percent last year to 12 percent next year and 20 percent to 25 percent the following year,” said Ade.

According to Ade, total textile and garment exports from the region stood at over $30 billion last year, including $10.8 billion from Indonesia, $9.3 billion from Vietnam, about $8 billion from Thailand and $2.5 billion from Cambodia.