Textile exports exceed expectations

Indonesian exports of textile and textile products have already reached the value of US$12.4 billion in 2017 exceeding the Indonesian Textile Association (API)'s target of US$11.8 billion.

Indonesia's textile exports rose around 5% on a year-on-year basis in 2017. This is a great performance because the country's textile exports had been rather stagnant in the 2012-2016 period, and secondly global textile demand actually declined this year.

According to data from API, Indonesian textile exports to both the United States and Japan declined by 2% percent in 2017.

Meanwhile, demand from the European Union fell 3% and yet this decrease was offset by rising textile demand in Southeast Asia and the Middle East.

Another important factor is that, generally, Indonesia's competitiveness has improved in the textile industry; hence it can offer its textile products at more attractive prices on the world market. Several years ago various textile factories were moved from West Java and Banten to Central Java because minimum wages rose too steeply in West Java and Banten. The Central Java, on the other hand, still offers a relatively cheap production environment.

Meanwhile, the stable economy of Indonesia has attracted more investment in Indonesia's textile sector. According to data from Indonesia's Investment Coordinating Board (BKPM), a total of IDR 10.24 trillion (approx. US$ $759 million) was invested in Indonesia's textile industry in the January-September 2017 period, much higher than the IDR 7.54 trillion that was invested in the same period one year earlier.

Although demand from the United States fell, the world's top economy remains the biggest market for Indonesian textiles. About 36% of Indonesian textile shipments go to the United States. On second place comes the Middle East (23%), followed by the European Union (13%).

A concern for Indonesia's textile industry is that competition from Vietnam is rising. Problematically, and unlike Vietnam, Indonesia does not have a free trade agreement with the European Union. Therefore, Indonesian textile exports to Europe are subject to import duties in the range of 5%-20%, while Vietnam can export its textile products to this region without import duties. This makes Vietnam's products more competitive and attractive for EU buyers.


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