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Performance of Textile Industry 2007 and Forecast in 2008

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1 Performance of Textile Industry 2007 and Forecast in 2008
INDONESIAN TEXTILE ASSOCIATION ASOSIASI PERTEKSTILAN INDONESIA Performance of Textile Industry 2007 and Forecast in 2008 Adhigraha Bldg. 16 th fl. Jl. Jend. Gatot Subroto, Kav. 56 Jakarta – Indonesia Tel , Fax Website:

2 NASIONAL MACROECONOMIC Economic Indicators
BUSINESS CONDITION 2007 NASIONAL MACROECONOMIC Economic Indicators 2004 2005 2006 2007 (est) Economic Growth (%)* 5.13 5.60 5.50 6.00 Inflation (%)* 6.40 17.11 6.60 6.38 Currency (Rp/US$)* 9.360 9.830 9.020 9.130 BI Rate (%)* 7.40 12.75 9.75 8.00 Investment (Rp. triliun)* 58.30 118.28 59.29 167.92 Goods Trade Balance (USD billion)*** 25.06 27.96 39.73 39.92 Non-oil Trade Balance (USD billion)*** 21.15 26.19 37.49 39.51 Number of Unemployment (million people)**** 9.80 10.70 11.70 12.70 Number of Poverty (million people)**** 36.20 35.10 39.05 45.70 Source : BI*, BKPM**, BPS***, Lipi**** procecced The economic growth is still reduced by inflation and society purchasing power has yet to grow. No spreading out of economic growth (still focusing on the non-intensive labor sectors); thus it has yet to reduce unemployment and poverty. Performance of the real sectors (trade balance) are still hampered, and it has yet to be able to give good impact on the economic growth.

3 Domestic and World Textile Consumption
BUSINESS CONDITION 2007 Domestic and World Textile Consumption Domestic Finished Clothes Consumption 2007 (Est.) Total People Consumption * US$ 268,17 billion Finished Clothes Cons. (2,5%)** US$ 6,71 billion Volume conversion (US$ 5,5/kg)** ton Source: BI*, BPS** processed By value, finished clothes consumption declined but by volume the domestic consumption increased. Consumption per capita reached 5.3 kg (in 2006: 4,6kg/capita) World consumption increased by 3%. World consumption per capita in 2007 about 8,48 kg (in 2006: 8,37kg/capita) Source : WTO, Otexa, Eurotex processed

4 DOMESTIC MARKET (Total Sales: 358.000 ton worth US$ 1,97 billion)
PERFORMANCE OF TEXTILE INDUSTRY 2007 National Textile Production & Model of Distribution 2007 (000 ton) Production : 800 Export: 220 (27,5%) Impor : 705 Fiber : Production: 1680 Export: 800 (47,6%) Import: 90 Yarn: Production: 970 Export: 320 (32,9%) Import: 110 Fabric: Production: 410 Export: 380 (92,6%) Import: 20 Garment : Production : 120 Export: 110 (91,6%) Import: 68 Other Products: Production: 230 SMEs Garment : DOMESTIC MARKET (Total Sales: ton worth US$ 1,97 billion) Source: API (processed) Indonesia is still relying on export market by USA, EU and Japan as the main export destination country.

5 Trade Performance (Export-Import)
PERFORMANCE OF TEXTILE INDUSTRY 2007 Trade Performance (Export-Import) Trade Performance 2007 (Compared to 2006) Sub-Sector Export Import Value (US$ billion) Volume (000 ton) Fiber 0,3 (15% increase) 220 6% increase) 0,98 (24% increase) 705 (increase 18%) Yarn 1,89 (6,1% increas) 800 (1% increase) 0,23 (17,8% decrease ) 90 (decrease 29%) Fabric 1,44 (2% decrease ) 320 (0,6% decrease ) 0,44 (22% increase) 110 (increase 5,7%) Garment 5,97 (13,2% increase) 380 (1% increase) 0,15 (200% increase) 20 (increase 81%) Other product 0,46 (15% increase) 110 (10% decrease ) 0,25 (increase 177%) 68 (decrease 21%) TOTAL 10,06 (6,4% increase) 1.830 (2,6% decrease ) 2,05 (increase 29,7%) 993 (increase 4,6%) Source: BPS (est) processed Export value increased by 6.4% (has yet to meet growth target by 10% annually). Export volume declined and the increase of export was driven by increase of unit price. Importing clothing drastically increase. Trade balance totaled US$ 8.01 billion (increased by 1.8% compared to 2006). The world trade value of 2007 reached to USD 546 billion, and Indonesia only dominated 1.8% of the total market share. Source: BPS

6 Domestic Market Condition
PERFORMANCE OF TEXTILE INDUSTRY 2007 Domestic Market Condition Domestic market consumption increased by 20% to 1.22 million ton. The local products sales in domestic market declined by 42.9% to ton and 22% share (far from the target of 75%). Import volume of clothing and other products increased by 72%. Import products dominated domestic market by 70% share to ton. Source : BPS, Ministry of Industry, BI, API Compiled

7 INDONESIA POSITION IN USA MARKET
PERFORMANCE OF TEXTILE INDUSTRY 2007 Position in Int’l Market INDONESIA POSITION IN USA MARKET JANUARY-OCTOBER 2007 Export to the US grew by 10% to US$ 4.32 billion. Indonesia’s share in the US market was 4.39% (in 2006 was 4.21% share). The position declined 1 level to 5th, under Vietnam by share 4.62% (in 2006: 3.74%). % SHARE

8 INDONESIA POSITION IN EU-27 MARKET
PERFORMANCE OF TEXTILE INDUSTRY 2007 Position in Int’l Market INDONESIA POSITION IN EU-27 MARKET JANUARY-AUGUST 2007 Despite EU import increased by 1.2% but Indonesia export to the region declined by 1.2%. Indonesia’s share is 1% and the position is in the 8th in the EU countries. %SHARE

9 INDONESIA POSITION IN JAPAN MARKET
PERFORMANCE OF TEXTILE INDUSTRY 2007 Position in Int’l Market INDONESIA POSITION IN JAPAN MARKET JANUARY-NOVEMBER 2007 *) In 2007, Japan textile import increased by 3.3% and Indonesia export rose by 2.1% to US$ 504 million. Indonesia’s market share in 2007 increased to 2.9% (2006: 1.8% share). % SHARE Note: *) Excl. EU-25

10 Inter-ASEAN Textile Trade
PERFORMANCE OF TEXTILE INDUSTRY 2007 Inter-ASEAN Textile Trade Data : *) Jan-Jun Indonesia Export to ASEAN slowly increased by 3.3% and the import fast increased by 15%, mainly from Thailand and Philippines. *) Jan-Jun

11 Impact on National Economic
PERFORMANCE OF TEXTILE INDUSTRY 2007 Impact on National Economic TEXTILE CONTRIBUTION AGAINST THE GDP VALUE 2007 INDONESIA TEXTILE TRADE BALANCE (US$ billion) Net Export : US$ 8,01 billion Dom. Sales : US$ 1,97 billion Investment : US$ 0,33 billion Total : US$ 10,31 billion GDP : US$ 423,69 Milyar SHARE SURPLUS OF INDONESIA TRADE 2007 (TOTAL US$ BILLION) SHARE OF WORKER IN TEXTILE INDSUTRY AGAINST THE NATIONAL INDUSTRY (97,58 MILLION) Biggest foreign exchange earner from non-oil sector (2,4% to GDP) Export surplus is always above US$ 5 billion annually The biggest absorber of workers in manufacturing industry 15% Textile & Garment (1,841,520)

12 TEXTILE BUSINESS CLIMATE 2008/2009:
CHANCE, CHALLENGE, OBSTACLE AND WORKING AGENDA IN TEXTILE INDUSTRY

13 National & World Economic
BUSINESS CLIMATE FORECAST 2008/2009 National & World Economic If target of 6.8% economic growth in 2008 can reachable and inflation can be reduced by 5%, the society’s purchasing buyer would increase. At any rate, government must focus on the sector driven to increase the economic growth. If not focusing on the increase of the manufacturing sector, the economic growth would be in appearance only since it cannot reduce number of unemployment and poverty. Along with the increase of the world crude oil price reached to about USD 100/barrel, the world economic is expected to slow down. It will impact on the growth of trade volume and value (export-import. The decline of growth in the importing countries will also make the trade dropped.

14 BUSINESS CLIMATE FORECAST 2008/2009
Textile Consumption & Supply-Demand Optimistic assumption, if government can increase society’s purchasing power, the textile consumption will grow to about 1.3 million ton in 2008. Despite not significant, the world textile consumption is predicted to remain grow and would be 56.6 million ton in 2008 by USA and EU as the main market. Source: WTO, Otexa, Eurotex processed

15 World & Domestic Textile Market
BUSINESS CLIMATE FORECAST 2008/2009 World & Domestic Textile Market Despite consumption grows, the illegal import will disturb market share of local products in domestic market. For that, share in the domestic market is predicted to remain under 25%. Growth of the world textile consumption will impact on the trade value. In 2008, the world textile trade will reach to US$ 565 billion. China and India are still dominating world textile trade. China will be free from the safeguard measure and to be member of WTO. Indonesia will face other potential competitor such as Vietnam and Kampuchea those get rapidly growth in the garment industry.

16 World & Domestic Textile Market
BUSINESS CLIMATE FORECAST 2008/2009 World & Domestic Textile Market To increase competitiveness in the domestic and export, the government should focus on: Having trade cooperation (FTA) with the countries to be main export destination like USA and EU, like with Japan (IJ-EPA). Activating ITPC as marketing agent of the national industry in cooperates with related associations relating to the effort to have market penetration. Facilitating promotion like exhibition and other promotional activities in the countries to be main textile export destination, such as Textile World (EU), Magic Show (USA), ITAF, IFW, etc. Handling problem of unfair trade competition, in which import goods can be easily imported and circulated to the domestic market.

17 Target on Production Capacity ITPT National 2010
BUSINESS CLIMATE FORECAST 2008/2009 Investment & Machinery Modernization Despite banking is still focusing on the government obligation savings; however, some banks begins allocating funds to the textile industry. Program of Increasing Machinery Technology in the textile industry drive textile manufacturers to modernize machines and expand production capacity. In 2007, the investment increased to US$ 300 million. This investment will impact on the performance of textile industry in the future. In 2008, it is expected that there would be increase of investment of more than US$ 500 million. The fund is allocated to modernize machines in the sectors of spinning and weaving and increase production capacity in knitting, finishing, and weaving. Restructuring/ Modernization - 2.5 million spindle - 200,000 shuttle loom Expansion - 20 Man Made Fibre unit 2.4 spindle 63,500 shuttle-less loom 16,600 knitting mach. 221 finishing unit 179,000 sewing mach Increase of Production Capacity (million ton) Fiber : Yarn : Grey Fabric : Finish Fabric : Garment : Target on Production Capacity ITPT National 2010

18 Availability of Energy Supply
BUSINESS CLIMATE FORECAST 2008/2009 Availability of Energy Supply The energy supply from PLN has yet to meet the industry’s demand. The electricity base rate (4 cent/kwh) is competitive enough, but the applied rate (due to peak season program, multiuse, public lighting and VAT) makes no longer competitive (8 cent/kwh). Textile industry has begun doing energy diversification by building private power plant using coal and gas as fuel source Source : API Compiled

19 Government should focus on:
BUSINESS CLIMATE FORECAST 2008/2009 Availability of Energy Supply Government should focus on: Giving priority to primary energy (gas and coal) to meet the domestic energy demand. Supporting industry to have energy diversification by making sure continuity of gas and coal supply to the industry. Increasing efficiency for the PLN performance and building new power plant using domestic source of primary energy; thus it can meet industry’s need by competitive price.

20 Average Cost for Labor 2007 (US$/hour) Labor Productivity Rank 2005
BUSINESS CLIMATE FORECAST 2008/2009 Labor The labor system cannot drive increase of workers’ productivity; thus it declines competitiveness. The Act No. 13/2001 especially for minimum wage, outsourcing, overtime, and severance pay, is still burdening industry (un-friendly business policy). The Work Training Center has yet to be maximally used to increase workers’ productivity. Average Cost for Labor 2007 (US$/hour) Indonesia : 0,76 China : 0,55 Vietnam : 0,35 India : 0,60 Pakistan : 0,40 Bangladesh Labor Productivity Rank 2005 Thailand : 27 Malaysia : 28 Korea : 29 : 31 Filipina : 49 : 59 Source : Min. Of Labor compiled from any other source Company does training to increase workers’ productivity, either done internally or makes cooperation with the training institutions

21 API in cooperates with government should focus on:
BUSINESS CLIMATE FORECAST 2008/2009 Labor API in cooperates with government should focus on: Revising the Act No. 13/2001 mainly in minimum wage, outsourcing, overtime, severance pay to make business more and more favorable. Reactivating Work Training Center (BLK) as training institution to increase workers’ skill and productivity. Supporting training and education centers to increase workers’ productivity. The centers can make cooperation with industry in arrange model of training and education.

22 Terminal Handling Charge Rate (US$)
BUSINESS CLIMATE FORECAST 2008/2009 Infrastructure High-cost economy in transportation sector (from, in and to the seaports): The THC rate is more expensive compared to the ASEAN countries. Access to seaports damage and traffic jam (cost and time of transportation is more and more increase). Terminal Handling Charge Rate (US$)  Country 2004 2005 20 feet 40 feet Indonesia 150 240 97 Singapore 110 160 Philippine 78 N/a Malaysia 76 Thailand 40 Source: Indonesian Shipowner Association (DEPALINDO)

23 BUSINESS CLIMATE FORECAST 2008/2009
Infrastructure To handle the problems in infrastructure, API and government should focus on: Increase productivity and efficiency of the seaport performance to make quicker services and reduce THC of 20-feet under US$ 70/container and 40-feet under US$ 100/container. Improving access from and to the seaport to reduce traffic jam. Drive investment in transportation sector (train) from industrial estates to the seaport. It will make transportation faster, safer and more competitive price.

24 TARGET OF THE TEXTILE INDUSTRY 2008:
By above estimation and forecast, performance of the textile industry in 2008 is targeted: Investment aimed at modernizing and expanding production will increase 5% of production capacity; thus, the production utilization is targeted to be above 80%. By new investment, it is expected there would be growth by 5% of number of workers. Import growth in the US, IJ-EPA and AJ-EPA, correction of the RMB value against the USD, political condition in Pakistan, industrial growth of home textile in Asia, and accurate promotional strategy are expected to drive growth by 10% of export. The domestic market will be difficult to reach. At any rate, if the national textile industry can seize market share of uniform, the local products are expected to dominate 60% of the domestic market. ---- T H A N K Y O U ---

25 TARGET OF THE TEXTILE INDUSTRY 2008:
Forecast of textile export by sub-sector in 2008 as follows: Total Export Growth : 10% Fiber export growth : 0% Yarn export growth : 10% Fabric export growth : 5% Ready-made wear : 12% Other textile export growth : 6% Forecast of Textile Export Value of 2008 Total : US$ 11,06 billion Fiber Export value : US$ 0,3 billion Yarn export value : US$ 2,08 billion Fabric export value : US$ 1,51 billion Ready-made wear export : US$ 6,68 billion Other : US$ 0,49 billion

26 T H A N K Y O U INDONESIAN TEXTILE ASSOCIATION
ASOSIASI PERTEKSTILAN INDONESIA Adhigraha Bldg. 16 th fl. Jl. Jend. Gatot Subroto, Kav. 56 Jakarta – Indonesia Tel , Fax


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