Indonesia's textile industry entered the year with high optimism, which was subsequently followed by steady growth, but the ongoing trade war between the United States and China may present some obstacles. (Photo courtesy of Unsplash/Nafinia Putra)

Indonesia's Textile Sector Needs Special Attention Amid US-China Trade War, Industry Group Says

AUGUST 29, 2019

Jakarta. Indonesia's textile industry entered the year with high optimism, which was subsequently followed by steady growth, but the ongoing trade war between the United States and China may present some obstacles.

The sector expanded by 8.7 percent in 2018, according to Central Statistics Agency (BPS) data, and it is one of the country's five industry mainstays on the Making Indonesia 4.0 Roadmap, set to create more jobs and become a major contributor to the country's exports.

Amid concern over the industry's future, Indonesian Textile Association (API) chairman Ade Sudrajat suggested that the government formulate a strategy to overcome the impact of the trade war.

"The US-China trade war will have a negative impact on developing countries, no matter what. We [the textile industry] should survive, but to do so, the government must implement clear policies," Ade said.

He noted three points the industry and the government must focus on to keep the industry strong.

"First, we must keep our domestic market on high alert for potential fallout from the trade war. We must ensure regulations do not hamper or create difficulties for industry stakeholders," Ade said.

"Second, we must expand outside our traditional markets, to regions like the Middle East, Africa and South America," he added.

Ade said South America had great potential and added that Indonesia already has an ongoing trade deal with Chile.

"Thirdly, businesses must use their market access as far as possible; don't be inactive, be aggressive," he said.

According to the API chairman, the textile industry has been doing fine so far. Indonesia's textile exports have increased for three consecutive years, to $13.3 million in 2018 from $12.8 million in 2017 and $12.3 million in 2015. Ade believes this may rise to $15 million this year.

Viscose staple fibers (VSF), or artificial cotton fibers, are natural and biodegradable. These fibers are obtained from wood pulp and cotton pulp, which share the characteristics of cotton fibers. These are versatile and easily bendable fibers and have a wide range of application in apparels, home textiles, home furnishings, dress materials, woven wear and knitwear.

According to Fiber Organon, world demand for viscose is expected to increase by 7 percent to 8 million tons by 2020, four times more than in 2001. Fibre2fashion predicts that viscose staple fiber consumption would increase significantly in the Asia-Pacific region by 2023, with China recording the biggest potential growth of 6.1 percent, followed by India at 7.2 percent and Indonesia at 5.7 percent, compared with this year.

"Our strongest exports are garments. But the biggest obstacle to that is the need to import raw materials. But now we are looking into [locally produced] rayon fibers," he said.

Asia Pacific Rayon (APR) leads the cellulose fiber industry in Indonesia. APR answers the global call for sustainability among the world's industries, including textile. As the fashion industry's demand for more environmentally friendly materials keeps increasing, APR has also made sure that all its rayon comes from renewable and biodegradable materials.

APR has invested in the construction of a viscose rayon factory with an annual production capacity of 240,000 tons. The company has been exporting its products to 14 countries since the start of operations early this year. The countries are Turkey, Pakistan, Bangladesh, Vietnam, Mauritius, Sri Lanka, Nepal, Brazil, Germany, Portugal, Italy, the United Arab Emirates and India.

Indonesia is currently one of the largest producers of rayon in the world. By keeping its rayon production domestic, APR hopes not only to help the local fashion industry grow, but also to reduce its reliance on imported raw materials. 

"Businesses must learn about trade missions [to other countries]. APR could go to Chile, for example, and introduce its rayon there," Ade said.

With falling prices of Chinese products, the company may face tighter competition. However, Ade said APR could offer semi-finished materials to China.

"There is no problem with China. By doing this, APR could increase its exports and production capacity," he said.