STUDIES ON INDONESIAN TEXTILE AND GARMENT INDUSTRY: CURRENT SITUATION, CHALLENGES, GOVERNMENT’S POLICIES AND PROSPECTS Wu Chongbo
ABSTRACT Since the beginning of the 1970s’, the ethnic Chinese in Indonesia shifted their investment from business to manufacturing, textile and garment industry was one of their focus, now 90% of the Indonesian textile and garments industry are run by the ethnic Chinese in Indonesia. This paper intends to probe the Indonesia’s textile and garment industry entitled “Analysis on Indonesia’s Textile and Garment industry: Current Situation, challenges, Government’s Policies and Prospects”. The paper is divided into three parts: 1, Profile of Indonesian Textile and Garment industry; 2, the reasons why Indonesian textile and garment industry facing difficulties; and 3, Indonesia government’s policies towards textile industry and prospects. Key words: Indonesia Textile and Garment Industry Difficulties and Prospects
Textile and Garment industry is one of the most significant sectors that give directly contribution to the economic growth in Indonesia. The Textile and Garment industry is not only absorbing many workers but also giving the biggest foreign exchange compared with other sectors.
1, Profile of Indonesian Textile and Garment industry
According to the data from Department of Industry and Trade that the number of textile and Garment industry in Indonesia was about 88 companies in 1987, and over 2000 in 1992, in 2003, it reached to 2654. The geographical distribution of the Indonesian textile industry is highly concentrated on the island of Java, and in particular in West Java. Almost 90% of the textile industry is located in Java, and 54.8% are concentrated in West Java alone. For the garment industry, high concentration is to be found in West Java, Jakarta and Batam Island, the latter being a free trade zone. About half of the country' textile production goes into the world market. The textile and s Garment industry as a whole counted as the single leading foreign exchange earner in non-oil and gas exports, reaching US$ 6.5 billion in 1997, a tremendous increase from US$ 559 million in 1985.Since early of 1990s’, about 16% of the total value of Indonesian manufacting export came from Clothing and Garment sector. In 2000, Indonesia achieved a record US$8.2 billion (Rp74.9 trillion) in exports and was ranked 10th among the largest producing countries. The figure was US$7.6 billion in 2001 and US$7 billion in 2002. In 2003, Indonesia has already earned US$7.03 billion from exporting textile and textile products, but Indonesia’s rank position was down to 17th, and accounted for only 2.15% of the US$500 billion global Draft Only – Not for Citation 1
garment trade. The government estimates that textile and apparel exports to increase to US$7.5 billion this year(2004)(1). According to data from the Ministry of Trade and Industry, by last year (2003) 2,654 textile companies across the country employed more than 1.18 million people. In 2004, Indonesia' textile industry employs s about 1.5 million people, and the sector employs about 3.5 million people directly and indirectly(2).
In 2002 and 2003 were the very difficult years for the textile businessmen. In those years many Clothing and Garment factories got bankruptcy. Bandung, the provincial capital of West Java, and once the main textile and footwear production belt for exports and the local market, has been closed more than 100 factories over the past two years. This sector’s capacity utilization is now only about 65 percent.
2, The reasons why Indonesian textile and garment industry facing difficulties On January 1, 2005, a quota system designed to protect the industrial interests of the United States and the European Union from a flood of cheap imports will be abolished. Although meant to be in the spirit of a new era of free trade and the drive for liberalization, the move will put the jobs of more than 10 million workers across...
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