NarmadaTextiles.com
Article Indonesian Apparel

Indonesian apparel exports to get cash injection
Shipments to US increased 18 per cent in 2005

Indonesian apparel exports to get cash injection (Country Report)

12 January 2005 - Indonesian apparel exports to the US grew by 18 per cent in 2005 and could be further boosted by a government loan initiative to help replace aging machinery. Expensive freight handling charges are also being cut to stimulate business but the race is on to save companies from closing.Indonesia is attempting to safeguard its textile and apparel manufacturers from going bankrupt in the face of surging Chinese competition.The industry is suffering, mainly from old machinery and has not got the money to replace them.


LoansBank Indonesia has agreed to government requests to offer enhanced loans to manufacturers of 2 trillion rupiah (US$211 million) which will be used to replace aging machinery.Many producers are currently using 15 year old machines which, they say, is seeing competitiveness falling behind a more dynamic China.The loans have been introduced following government lobbying of its central bank on 12 January which has seemingly yielded its fruits despite the high lending risks involved.Local banks have been unwilling to get involved in the scheme arguing that the government's macro economic policy is not favourable to the industry.They have also cited problems from China's surging exports as well as labour, tax and smuggling issues.The API has estimated a total of US$3.6 billion is necessary to replace all the aging machinery.The loans have been prioritised for 69 companies in West Java that are on the brink of collapse, Minister for Industry Fahmi Idris confirmed to Indonesian press.

A total of 77 companies have recently closed with up to 70,000 job losses and any possible loan from a local bank faced with such risks would have required an 80 per cent down payment and interest rates set at 14 per cent.Companies have been laying off workers claiming efficiency reasons and has been facilitated by several by-laws.Fuel prices were raised by the government in March and prompted a first wave of industrial job losses in the textile sector followed later in October with escalating raw material and production costs.


Exports to US up 18%Despite such problems, exports have been strong, but have fallen short of previous target growth forecasts.The value of total apparel exports to the US rose by 18.4 per cent in the ten months of 2005 to October against the same period a year earlier.This is a slight improvement on performance in the first half of 2005 and the industry has confidently predicted 7.5 per cent growth in apparel and textiles for 2006.Higher US and European demand has been the main driving force behind the positive export figures but the results were disappointing with only a 2 per cent growth, missing its 5 per cent target.API, the Indonesian Textile Association has optimistically predicted export growth to equal US$8.35 billion in 2006 compared to the predicted $7.5 billion for last year.


Cutting shipping costsThe government has planned to scrap 10 per cent value added tax (VAT) currently imposed on freight handling after complaints from shipping associations asserted overseas shipments were over burdened.This comes after announcements that terminal handling charges (THC) for 20-foot containers in all domestic ports were being cut from US$150 to US$95.The Rupiah is also gaining in strength with One US$ worth 9469.7 Rp by close of business on 11 January.

article courtesy of
www.emergingtextiles.com

Narmada Textiles
Back to the Top