Industry Profie: Weaving industry in Indonesia

MARKET INTELLIGENCE REPORT ON

DEVELOPMENT OF WEAVING INDUSTRY

October 2009

Backgrounds

The country’s weaving industry could not still improve its competitive edge with its old machines. Around 82.1% of 248,957 units of machine of weaving companies in the country have been too old and no long fit for operation.

Investment in this sector has not been significant to modernize the industry. The government has offered assistance in the form of discount in the prices of machines but the assistance seems to be not enough to being about significant result. In 2007, the government provided a total price discount of Rp15 billion for machines imported or bought by TPT companies.

In 2009, investment proposed by TPT companies averaged Rp10 billion or Rp1.767 trillion by 191 companies. The companies received a reimbursement of 10% of the total value of their purchase of machines from the government under the revitalization program.

The global financial crisis in 2008 also affected development of the country’s weaving industry. Demand for garments fell and loans were not easy to come from banks all added to the problem besetting the industry in 2008 and 2009.

Characteristics of product

Woven fabric is an intermediate product in the textile and textile product (TPT) industry which still needs further processes of dyeing, printing and finishing and to become the end product of garment.

Woven fabric is produced from basic materials like yarns and mono filament yarn. Yarns from Polyester mono filament are used as the basic material for fabric with a content of 100% synthetic yarn while Polyester staple fiber and rayon fiber, cotton fiber and acrylic fiber are the basic materials for fabric with a mixture of synthetic and natural fibers.

Capacity flat

Investment in the sub-sector of weaving is small that the production capacity of the industry remained almost unchanged. The program of revitalization has brought no much change in this sector. Only a few of old machines have been replaced.

In 2006, the capacity of the country’s weaving industry was recorded at 1,777,000 tons per year. The capacity even declined 2.5% in the following year to 1,773,000 tons per year and then to 1,750,000 tons in 2008.

The production capacity declined as some of the old machines could not be used.

For the sake of example, a new machine could turn out 900 yards of fabric per hour as against only 650 yards per hour by an old machine with the same capacity. In addition old machine are energy wasteful.

Only large producers have invested for new machines. Small and medium producers have not invested for new machines that the production capacity of the country’s weaving industry has declined.

Most or 170 of the 190 TPT companies asking for subsidized credit under the textile revitalization program offered by the government in 2009, are medium to large companies under the first scheme of the program with the remaining 20 small and medium scale companies under the second scheme.

Main producers

The past several years have seen no significant investment to expand the capacity of the country’s weaving industry. The main players in the industry are still the same old companies.

The main players operate integrated facilities such as PT. Apac Inti Corpora with a production capacity of 80 million meters of greige fabrics/ year and 60 million yards of denim annually. Apac also produces textile basic materials in the form of yarns with an annual capacity of 482,000 bales.

Other TPT companies operating integrated facilities include PT. Argo Pantes, Tbk. Argo Pantes has a fabric production capacity of 87.5 million meters / year. Argo Pantes belongs to the Argo Manunggal Group which has 17 other TPT companies operating integrated facilities with products ranging from yarns to garments.

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