The decline in the performance of the country's Textile and textile product (TPT) industry including weaving industry as indicated by sluggish growth of production and sales shrinking is caused by inefficiency with machines too old to be fit for operation. The abolition of the export quota system by the United States and Europe as ruled by the WTO put the country's TPT industry face to face with giant rivals mainly from China and India in lopsided market competition. The quota restriction had been a protection for weak market competitors like Indonesia against powerful rivals.
Around 80% the machines and equipment of the country's Textile industry have been more than 20 years in age. The country's weaving industry had 204,393 units of machines already aged more than 20 years.
Inefficiency has also compounded problem faced by spinning and knitting industries as well as garment industry. Around 5.03 million units of spinning machines, 34.743 units of knitting machines, 325 units of finishing machines and 226,854 units of garment making machines are no longer fit for operation.
The country's textile industry also faces problem in the limited availability of basic materials such as viscose staple fiber, and cottons fibers for which the country still heavily dependent on imports.
Based on data the industry ministry, rayon fiber production from the only producers PT South Pacific Viscose and PT Indo-Bharat Rayon totals only 287,000 tons a year and 30% of which are exported. With domestic requirement of 250,000 tons, the country will have to import the shortage in supply of rayon fiber.
Early 2007, the government offered tax incentive for textile industry. Textile producers urged the government for the inclusion of rayon fiver and polyester industry in the sectors receiving income tax facility.
The tax facility for the Textile industry is offered only to new investment in spinning, yarn, weaving, printing and finishing industries and garment sectors.
Production capacity tends to be stagnant
The production capacity of the country's weaving industry has not increased in the wake of the 1997/1998 crisis and the abolition of the export quota in 2005. Expansion of production capacity will require large investment as it will require not only construction of new facility but also replacing of old inefficient machines.
As a result the country's production capacity has remained stagnant. In 2003 the production capacity of the country's weaving industry dropped sharply to 1.724 million tons from 2.01 million tons in the previous year.
A number of producers of woven fabric have expanded their capacity but there are more factories forced to stop operation because of marketing problem. In 2004, the production capacity grew slightly to 1.778 million tons, but fell again in the following year to 1.777 million tons.
Production of woven fabric declining
The country's production of woven fabric has declined in the past several years mainly because of the condition of the machines.
Shuttle less looms (the products of modern technology) make up only 13% or 29,000 of the total number of 226,000 looms in Indonesia. The majority 87% or 197,000 units are shuttle looms (old technology) that could produce only cloth grade A 25%, grade B 30% and grades C and D 45%.Modern machines could produce grade A up to 85% with the same production cost. The price of cloth of grade A generally is 15% higher than one of grade B.
In 2002, the production of woven fabric totaled 1.275 million tons up slightly to 1.274 million tons in 2003. In 2004, the production rose further to 1.312 million tons before declining to 963 tons in 2005 and to 946 tons in 2006. ...........................
INDONESIAN COMMERCIAL NEWSLETTER
List of Contents
FOCUS: OPTIMISTIC 2008 DRAFT STATE BUDGET 1
DEVELOPMENT OF SPINNING INDUSTRY 8
Current issue 8
Characteristic of products 9
Production capacity and producers 10
Production declines 15
Supply and basic materials 16
Exports tend to fluctuate 18
Imports small 19
Consumption declined 19
Government policy 21
Conclusion and prospects 22
INDONESIA'S WEAVING INDUSTRY 23
Current issue 23
Characteristics of products 24
Production capacity tends to be stagnant 24
Production of woven fabric declining 25
Utilization of machines of weaving industry declining 26
Rayon feiber, cotton and polyester filament requirement 27
Imports woven fabric tend to decline 27
Exports of woven fabric 28
Market size 28
Government regulation 29
Leading companies operating in weaving industry in Indonesia 32
Texmaco waiting for investor 34
Expansion and new investment 35
Conclusion and Prospects 36
COMPANY PROFILE: APAC GROUP 37
FINANCE : FINANCING PROGRAM OF TEXTILE MACHINE RESTRUCTURING 42
Textile factory machines outdated 43
Rp 9.82 trillion needed for textile machine restructuring 43
Financing scheme for restructuring program 44
New machines 45
Interest in restructuring high 46
PRODUCTION OF PTA (PURIFIED THEREPHTHALIC ACID) STILL GROWING 49
COAL FOR FUEL IN TEXTILE INDUSTRY 54
SYNTHETIC FIBER INDUSTRY IN INDONESIA 60
GARMENT INDUSTRY STILL GROWING 68
CORPORATE NEWS IN BRIEF:
PT Dirgantara declare bankrupt facing potential loss 73
Antam needs US$ 1.5 billion to finance acquisition 73
Renault to build US$ 600 million car factory in Indonesia 73
Oentoro Surya to build shipyard in Batam 74
GE to invest US$ 700 million in coal gasification project 74
Telkom rejects call to acquire Inti 74
MNA starts operating Chinese MA60 Aircraft 75
Medco expands operting to Somalia 75
API II to team up with private co to build new cargo terminal 75
ECONOMIC NEWS IN BRIEF:
Trade with Russia expected to triple in value post Putins visit 76
Govt. dismisses warning of port boycott 76
Government announces progressive increase in CPO export tax 76
Government to regulated HRC imports to prevent monopoly 77
Control maintain on imports of rice and sugar 77
Foreign fishing vessels seeking new operation license 77
Countries asked to pay for oxygen produced by Indonesian tropical forests 78
United States and EU seek to prevent Indonesia domination of pulp market 78
Govt. to establish holding Co. for State plantation companies 78