Securing Raw Materials Key to Competitiveness of Indonesia's Textile Industry

BY : JAKARTA GLOBE

DECEMBER 19, 2018

Jakarta. Indonesia is set to become one of the top five textile and textile product producers in the world by 2030, and the Ministry of Trade is forging ahead with its Making Indonesia 4.0 roadmap, which prioritizes the development of a number of industries, including the textile sector.

Muhdori, the trade ministry's director tasked with the textile, leather, footwear and various other industries, said the implementation of the roadmap would strengthen the textile sector's global competitiveness, as it improves efficiencies and product quality.

“Being highly integrated from upstream to downstream, this sector is competitive and is supported by a large amount of human resources for its production activities,” he said.

The challenge for the textile industry was to become more efficient, while continuing to improve human resource competencies, in accordance with technological development, he said.

“Being both an export-oriented and labor-intensive sector, the textile industry has thus far contributed significantly to Indonesia's economic growth,” Muhdori said.

According to the Ministry of Industry, textile and textile product exports have continued to increase in recent years. The textile and textile product sector's contribution to Indonesia's gross domestic product amounted to a record $10.46 billion last year, while exports were valued at $12.58 billion, up 6 percent from 2016.

Increased Exports

The Ministry of Industry pegged textile exports at $13.5 billion this year, along with the creation of 2.95 million new jobs in the industry, while exports are projected to increase further to $15 billion next year, with the creation of up to 3.11 million jobs. This will increase the sector's share of Indonesia's total exports to 1.6 percent.

The ministry is optimistic that this year's growth target of between 4 percent and 6 percent can be achieved. The textile industry grew 3.45 percent last year, having nearly doubled from 2016.

However, this growth target also calls for an increased supply of raw materials, which currently consist of 51 percent synthetic fiber, such as polyester and nylon, 37 percent cotton fiber, and 12 percent rayon.

But the industry still faces obstacles in reaching its full competitive potential, as nearly all cotton must be imported. In contrast, 80 percent of synthetic fiber and 85 percent of rayon are domestically produced, with these numbers expected to increase further.

Rayon is a cellulose material extracted from soluble wood pulp. It offers better absorption and breathability than cotton. Rayon fiber has various uses, including in clothing, bedding, towels, baby wipes, masks and personal hygiene products.

According to Redma Gita Wirawasta, secretary general of the Indonesian Synthetic Fiber Producers Association (APSyFI), rayon is most in demand in the fashion industry due to several advantages, such as comfort and disposability, which make it environmentally friendly.

“Indonesia has the potential to become one of the largest rayon industry players in the world, supported by extensive land availability and a suitable climate. This makes Indonesia comparatively superior to other rayon-producing countries,” he said.

Raw Materials

Redma Gita said the growth of the rayon fiber industry requires sustainable raw material supply through industrial plantations.

“Rayon plants supported by industrial plants not only strengthen the structure of the textile industry, but also reduce its dependence on imported raw materials, which has been an issue for national textile competitiveness,” he said.

“This upstream industry could even generate foreign exchange as some of its production is exported,” he added.

The Ministry of Industry noted that the production capacity of the rayon fiber industry has risen substantially over the past three years. Production is expected to increase to about 700,000 metric tons this year, compared with 565,000 tons last year and 470,000 tons in 2016.

Production capacity growth is expected to continue until 2021, when it is expected to reach 1.2 million tons.

However, the industry faces challenges from environmental activists. Redma Gita refuted allegations from Canopy, an international nonprofit focused on forest conservation, which stated that raw materials for rayon fiber comes from ancient and endangered forests in Sumatra and Kalimantan.

“Those accusations are baseless. They have provided no proof of this whatsoever,” he said. He also highlighted the importance of the government in supporting the development of the national textile industry.

Machmud Thohari, a forestry expert, meanwhile also questioned the Canopy report's use of terms such as ‘ancient’ and ‘endangered’ to categorize forests.

“As far as I know, the terms ‘ancient’ and ‘endangered’ aren't commonly used in the scientific classification of forests," he said.

Thohari said the term ‘ancient forest’ may have been used to refer to an old-age forest or one that is many, many years (i.e.: centuries) old.

On a similar note, Riau Governor Wan Thamrin Hasyim also condemned the Canopy allegations, as he sought to highlight the strategic industrial potential of the province.

“The accusation must be clarified, as it can deter investors and [negatively impact] Riau's economic growth,” he said.

Exports and Job Creation in the Textile and Textile Products Sector

Year Exports (in billion dollars) Jobs (in millions)
2017 12,58 2,73
2018* 13,5 2,95
2019* 15,0 3,11
Source: Ministry of Industry

* Projected

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