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APSyFI: The national textile industry is headed for a trade deficit, 2018 exports grow 1% and imports grow 14% (yoy).--IKATSI: The growth of the national textile industry is still hampered by floods of imports, Indonesia needs a clothing security law.

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Home arrow Latest News arrow Textile and Automotive Become Main Sector

Textile and Automotive Become Main Sector PDF Print E-mail
Written by Maizer   
Friday, 28 June 2019

The last few years Indonesia's trade balance has experienced a deficit. This was caused by the export value that did not increase significantly. Meanwhile, imported goods are quite large. Bank Indonesia (BI) released a report that the current account deficit in the first quarter of 2019 was USD7 billion or 2.6% of gross domestic product (GDP).


Even though this figure is lower than the deficit in previous quarter which reached USD9.2 billion or 3.6% of GDP, it remains a concern of President Joko Widodo.


Several times the President asked to prioritize business world to encourage exports and investment in the next five years. The last statement was made by Jokowi when receiving the ranks of the management of the Indonesian Employers' Association (Apindo) and the Indonesian Shopping Center Tenants Association (Hippindo) at the Merdeka Palace, Jakarta, mid-June.


Jokowi rate, increased exports and investment can overcome the current trade balance deficit. Indonesia must be able to take advantage of the crisis of China's trade war with America. Export industrial products are expanded and markets are expanded. Research and promotion must be encouraged.


Sectors that played a major role in providing significant foreign exchange from the achievement of export values ​​were the textile industry and derivative products as well as the automotive industry.


Textiles and Textile Products (TPT)


Data from the Central Statistics Agency (BPS) shows that the production of large and medium manufacturing industries (IBS) in the first quarter of 2019 increased by 4.45% on an annual basis. IBS growth was supported by the production of the apparel industry sector which skyrocketed to 29.19% due to an increase in orders, especially from the export market.


During the first quarter of 2019, the textile and clothing industry experienced a significant jump, growing 18.98%. This achievement in the first quarter of 2019 was far better than the achievement in the first quarter of 2018 of 7.46%, even exceeding the achievement in 2018 of 8.73%.


The TPT industry, besides giving a large contribution to the export value, is also classified as labor intensive. The high growth that occurred in the textile industry was supported by substantial investment in the upstream sector, especially rayon producers. This can be seen from the operation of PT Asia Pacific Rayon (APR) in Riau at the end of 2018 with an investment of Rp11 trillion. APR increased production capacity by 240 thousand tons per year. Of this amount, as many as 120 thousand tons are used for export, this is what causes an increase in exports.


Growth in upstream and downstream industries of the textile industry was a factor that pushed textile exports to rise 1.1% in the first quarter of 2019. And also the control of textile imports by the government also had a positive impact. TPT imports were recorded at 2.1% during the first quarter of 2019.


Last year, the textile industry growth was 8.73% or exceeded the national economic growth of 5.17%. Along with this, the textile industry has become a significant foreign exchange earner with export value reaching USD13.22 billion, up 5.55% compared to 2017. In addition, the textile industry has absorbed a workforce of 3.6 million people.


Currently the textile export market tends to improve and there are opportunities to enlarge existing markets such as Korea, the Middle East, Europe, Brazil and Latin America. Some textile companies continue to make efforts to expand the market, especially for the export market that has not been much touched. One export market that is considered very prospective is the United States (US) market. The impact of the trade war that occurred between the US and China will more or less provide opportunities for exporters to enter the land of Uncle Sam.


One of the textile issuers who are seriously working on the US market is PT Sri Rejeki Isman Tbk (SRIL) and PT Asia Pacific FIbers (POLY). Even though it is still under 10% of the contribution of the US market, future expansion will continue. Entering the second quarter of 2019, the US market has begun to feel a contribution to SRIL's total exports. According to him, the US market's own contribution is around 6% to 8% of total SRIL exports. In 2018, SRIL recorded sales of USD1.03 billion, growing 36.13% year on year (yoy) from the previous year.


POLY will also focus on the export market in 2019. POLY is also trying to expand the market in America and other countries in Europe that have not been fully penetrated.


Encouraging to inflate the export value of the textile industry and textile products (TPT), the government is ready to provide facilities and facilities to these companies. Among other things, the ease of getting machines and capital goods faster, then guaranteeing access to the availability of raw materials.


Also, the government implemented a fiscal incentive scheme in the form of super deductible tax or a tax reduction of more than 100 percent. The facility is provided to industries involved in vocational education programs and conducts research and development (R&D) activities to produce innovation.


The scheme proposed by the government is a 200 percent tax reduction for industries involved in vocational training and education. Then, 300 percent for industries that carry out R&D activities or innovations.


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