TP 1

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Information about TP 1
Business-Finance

Published on April 9, 2008

Author: Sharck

Source: authorstream.com

CREATING PROSPERITY THROUGH COOPERATION AMONG TEXTILE AND APPAREL MAKERS IN THE CONTEXT OF REGIONAL ECONOMIC INTEGRATION:  CREATING PROSPERITY THROUGH COOPERATION AMONG TEXTILE AND APPAREL MAKERS IN THE CONTEXT OF REGIONAL ECONOMIC INTEGRATION Presented By: Sunjoto Tanudjaja Indonesian Textile Association (API) TAIPEI, 9 - 11 December 2002 Slide2:  GENERAL ECONOMIC & BUSINESS ENVIRONTMENTS - DESPITE OF RECENT TRAGEDY IN BALI, INDONESIAN’S ECONOMIC GROWTH FOR 2002 STILL STANDS AT 3.8% AND 4% GROWTH FOR 2003. - A REVISED TRANSITION FROM AN AUTHORITARIAN STATE TO A DEMOCRATIC ONE. - LINGERING EFFECTS FROM THE “ASIAN CRISIS”, WORLDWIDE ECONOMY SLOW DOWNS, ESPECIALLY IN RESOLVING DEBT OVER HANGED ISSUES - FURTHER REFORMS IN LABOR LAW AND OTHER REFORMS IN FINANCIAL & POLITICAL AREAS. Slide3:  SOME KEY ECONOMY INDICATORS - Inflation Rate : Nov. 2002 = 1.85%; Cummulative Jan - Nov. 2002 = 8.72%. - GDP : 1999 = 0.85% (Constant Rate) 2000 = 4.84% 2001 = 3.32% 2002 = 3.39% (temporary figure, Jan - Sep. 2002). - Export of Textiles & Clothing, Jan - May 2002 = US$ 2.86 Billion. Slide4:  WORLD’S TEXTILE INDUSTRY: CURRENT SITUATION Fabrics Export from Various Country to USA Compared with 1998, textiles and product textiles export from Indonesia to USA decreased 40% in 1999, and in 2001 decreased 12.26% from 1999 figure. Among China, Korea and Taiwan, Indonesia’s share is the smallest. COUNTRY 1998 1999 2000 1. Indonesia 2. China 3. Korea 4. Taiwan 5. Other Total 148.8 373.1 596.1 472.5 4,112,2 5,702.7 82.2 365.9 647.6 487.4 4,016,0 5,599.1 107.5 424.7 698.7 463.2 4,342,5 6,036.6 *) Source: Werner International Management Consultants & Industry & Trade Attached. 2001 94.2 267.5 607.8 397.9 3,796.1 5,068.8 SHARE 2001 to TOTAL (%) 1.8 5.2 11.9 7.8 74.8 100 Slide5:  INDONESIA TEXTILES AND TEXTILE PRODUCTS EXPORT TO EUROPEAN UNION In 1994 ranked # 1 with 22.6 % share, but in 2001 went down to # 3 after China and Thailand, with share remaining for 10.5 % COUNTRY 1994 2000 2001/1994 (%) 1. China 2. Japan 3. S-Korea 4. Indonesia 5. Thailand 6. Taiwan 7. Turkey 8. USA 9. Pakistan 886 9,502 5,705 14,666 3,041 8,629 1,669 6,439 14,317 50,362 10,053 8,137 13,844 16,553 7,835 7,603 4,751 12,371 5584.2 5.8 42.6 -5.6 444.3 - 9.2 355.5 - 26.2 - 13.6 *) Source: Werner International Management Consultants Slide6:  ASIA’S MARKET RECESSION - Carribean Basin Act. - NAFTA - Central America (ANDEAN) - Mercosur (Brazil, Argentina, Chille) - Africa Growth Opportunity Act. (AGOA)  South Africa  Zimbague  Israel  Yordan  Madagaskar  Ghana Receiving facilitation for in and out of their textile & apparels. USA EU JAPAN - East Europe - Europe non-EU - North Africa - Bangladesh - Srilanka - Pakistan No tariff/non-tariff barrier applied. Not forming any agreement with any other country (It is expected that Japan will establish a new independent block with Asian Countries). The main reason why Asian Countries are losing their textile and garments market share in western market is caused by the U.S and E.U regional trade agreements that tend to bring benefits more to their surrounding countries other than that of Asian countries. Slide7:  Prominent export commodities such as textile & garments mainly supported by polyester are eroding their competitiveness in European market.. WHY ??? Partly caused by: a. Rapid formation of Regional trade agreement by the U.S and E.U. b. Prevalent of strong protectionism by the importing countries : Impacts of accusation of unfair business practices (such as anti-dumping, subsidy, etc.). Decline of textile/garments of export growth to USA will place worst hit “Asian Crisis” countries such as Indonesian and other Asian countries’ into more difficult situation. Hard to crack the Japanese market and other potential export markets as well. Emergence of strong textile/garments competitors --China & Vietnam, and other low cost Asean countries. WORLD’S TEXTILES/GARMENTS SITUATION: SUMMARY INDONESIA: ROLE AND FUNCTION OF THE INDUSTRY:  INDONESIA: ROLE AND FUNCTION OF THE INDUSTRY Recognised, even pre or post “Asian Crisis” period, as prime-mover of economic growth, through: (1) Largest earning foreign exchanges earner in/ non-oil/gas export. (2) providing job opportunity and (3) Source for domestic demand (1.2 million formal + 2 million informal). Strategic importance: ...... For economic growth. The industry acts as a vehicle of transformation from the agrarian society into that of an modern industrial economic system. Nationally, the share of textile/garments export to total export of non-oil & gas commodity reached 17,5% between 1996 - 2001.:  Nationally, the share of textile/garments export to total export of non-oil & gas commodity reached 17,5% between 1996 - 2001. Mill. US$ Sources: Central Bureau of Statistics No. 1996 1997 1998 1999 2000 2001 Share (%) Non-Oil & Gas Export Export of Textile/Garment 6,432 7,319 7,321 7,157 8,205 7,676 37,046 43,133 41,859 39,510 47,757 43,685 17.4 17.0 17.5 18.1 17.2 17.6 1. 2. 3. 4. 5. 6. Year Since the “Asian economy crisis” in 1997, Indonesia has been able to compensate the weak in domestic demand by increasing export. Indonesia ranked #12 among world’s exporters in 2000 (ITC Data).:  Since the “Asian economy crisis” in 1997, Indonesia has been able to compensate the weak in domestic demand by increasing export. Indonesia ranked #12 among world’s exporters in 2000 (ITC Data). (000) of tons Sources: Indonesian Textile Association (API) No. Domestics Export Total 2000 1999 1998 1997 1996 849 970 1,819 534 1,268 1,802 330 1,734 2,064 645 1,642 2,287 674 1,734 2,408 1. 2. INDONESIAN TEXTILE INDUSTRY:  INDONESIAN TEXTILE INDUSTRY The previous figures show that Indonesian textile/garment industry capable of cope with even the economic crisis, in addition of having a strong foundation and competitiveness in the global market. The industry has both upstream and downstream strength, from raw materials availability (except cotton) to other end-products and has a broad linkage with other sectors such as agriculture & forestry, mining, petro-chemical and so on. THE DEVELOPMENT OF INDONESIAN TEXTILE/GARMENT INDUSTRY:  THE DEVELOPMENT OF INDONESIAN TEXTILE/GARMENT INDUSTRY PRODUCTION: Capacity tends to increase, especially synthetic fibers. From 1995 - 2001, the capacity of synthetic fibers increased 89%; yarns 29%; fabrics 41%; and garments 40%. The highest trend showed by synthetic fibers as a result of availability in raw materials for polyester and rayon fibers. PRODUCTION STATISTICS, 1995 - 2001:  PRODUCTION STATISTICS, 1995 - 2001 No. Synt. Fiber: - Staple 1. - Filament Spun Yarn 2. Fabrics 2000 970,749 1999 839,566 1998 746,835 1997 617,660 1996 523,129 1995 476,275 701,205 652,163 652,163 566,784 59,815 395,225 1,355,098 1,346,236 1,131,533 1,017,394 1,022,934 947,407 1,546,360 1,346,236 1,341,245 1,241,137 1,208,184 1,104,950 3. 2001 961,041 690,679 1,224,780 1,561,824 Garment 554,436 543,150 535,034 460,365 427,740 402,460 4. 565,524 Commodity Unit : tons Source: Central Bureau of Statistics The utilization capacity of production decreased during the economic crisis in 1997, but in 1998 shows a rebounce. WORK-FORCE IN THE TEXTILE/GARMENT INDUSTRY:  WORK-FORCE IN THE TEXTILE/GARMENT INDUSTRY Indonesian textile/garment industry is one of the largest provider of job opportunity. Until 1996 (cummulative), the industry absorbed 1,058,202 employees and the figure increased to 1,219,325 employees in 2001, or reaching 15,2% increase (not including labor in small scale textile industry as much as 380,000 persons). Garment industry absorps the largest workers, then followed by weaving industry. LABOR STATISTICS, 1995 - 2001 :  LABOR STATISTICS, 1995 - 2001 No. Fiber Industry Spinning Ind. 1. Weaving Ind. Garment Ind. 2. Other Textiles 2000 29,324 1999 26,762 1998 1997 26,076 1996 25,524 1995 24,415 193,361 189,785 186,450 175,337 170,275 349,392 341,400 337,971 329,377 317,191 372,716 355,236 348,419 346,167 329,440 3. 2001 29,682 207,871 355,566 376,584 247,372 246,710 244,525 243,884 241,486 4. 249,622 Industry TOTAL 1,192,165 1,159,893 1,143,441 1,120,289 1,082,807 1,219,325 24,277 166,175 307,487 323,946 236,317 1,058,202 5. INVESTMENTS :  INVESTMENTS It provides a strategic importance for the economic development policy and related infra structure industries. It attracted both domestic as well as overseas investors. But due to the “Asian Crisis”, growth of investment in the sector has been weakening, especially for the few past years. For the year 1988 - 1992 investment growth reached 14,41%, while in 1995 - 2001 decreased until reaching only 2,30%. Up-stream industry enjoyed the highest growth, i,e, fiber industry reaching 8,87%, then followed by garment industry (6,57%) and spinning industry (5,49%). INVESTMENT STATISTICS OF THE TEXTILE INDUSTRY, 1995 - 2001:  INVESTMENT STATISTICS OF THE TEXTILE INDUSTRY, 1995 - 2001 No. Fiber Industry Spinning 1. Fabrics Ind. Garment 2. Other Textile 2000 10,938.57 1999 8,605.24 1998 1997 7,578,04 1996 7,297.76 1995 7,135.01 23,077.20 22,288.69 20,613,73 18,912.63 18,537.92 30,458.29 29,624,16 29,220,25 28,230.38 27,297.21 2,715.40 2,472.39 2,348,51 2,288.29 2,029.70 3. 2001 11,640.09 24,777.12 30,811.02 2,808.61 60,737.68 60,622.27 60,532.92 60,437.26 60,371.64 4. 60,786.27 Industry TOTAL 127,927.14 123,612.75 120,293.45 117,166.32 115,371.48 130,823.11 7,132.25 18,017.92 26,875.42 1,918.88 60,192.06 114,136.53 5. Unit : Bill. of Rp. EXPORT STATISTICS, 1984 - 2001:  EXPORT STATISTICS, 1984 - 2001 Export grows steadily, but decreased slightly in 2001 (6.45% down than previous year) due to global economy downturn. STRENGHTS & WEAKNESSES:  STRENGHTS & WEAKNESSES Why Indonesian Economy Still Rely on the Textile Industry ? The STRENGHTS of Industry: Long history of development. It started in the late sixties. Huge domestic market for over 220 million people. Availability of raw materials resources to support the industry competitiveness (such as oil/coal, agricultural products, forrestry). Still retain strong image for domestic and overseas buyers. Production facility with huge investment (Rp,127,9 trillion=US$ 14 billion). Multi-ethicities with a unique specific pattern and textile motives to support export market. Availability of higher education, university & polytechnique majoring in textile, also R&D Center to provide skillful manpowers for the industry. Cost competitiveness of Indonesian textile workers. STRENGHTS & WEAKNESSES…... (Cont’d):  STRENGHTS & WEAKNESSES…... (Cont’d) However, the Industry is Still Facing Big Challenges: Internal Factors: Errosion of competitiveness in up-stream industry. Supporting industry not well-developed yet (dyeing material, accessories, spare parts). Labor productivity still below other emerging Asian countries. Lack of educational institutions and R&D capable of supporting the industry to be a world-class manufacturer. Capability in design needs to improve. Economy infrastructures need to improve (such as financing, High local interest rates, taxation, transportation, other infrastructures). Slow pace of debt restructuring for firms under IBRA. Obsolete machinery and other equipments of the industry need to modernize/replace. STRENGHTS & WEAKNESSES…. (Cont’d):  STRENGHTS & WEAKNESSES…. (Cont’d) External Factors: Other countries have started their restructuring program with more sophisticated technology and better process than that of Indonesia. The upper layer country producers such as USA and EU are still governing textile trade, especially fabrics, and they created regional economy agreement with Indonesia’s competitors that geographically more close. A great number trade barriers and restrictions emerged such as dumping, safeguards, environmental issues, human rights, and other non-technical standards. Increasing competitiveness of lower layer competitors having raw material such as cotton and low wages. Other new compliance rules imposed by the U.S and E.U such as WRAPS, CSM-2000, ISO, etc FUTURE PROSPECTS :  FUTURE PROSPECTS A strong industrial chain from up-stream industry (fiber) to down-stream industry (garment industry). A tremendous prospect for synthetics fibers, especially petro-chemical-based industry (polyester, nylon) and forrest-based industry (rayon). Huge domestic market for over 220 million market and 500 million market with AFTA starting January 2003. Long history, learning experience are invaluable assets to develop the textile industry furthermore. Integration of MFA into WTO, quota elimination will provide opportunity to be tapped by the textile industry. DEVELOPMENT FOCUS FOR THE TEXTILE INDUSTRY, 2002 - 2010……… (Cont’d):  DEVELOPMENT FOCUS FOR THE TEXTILE INDUSTRY, 2002 - 2010……… (Cont’d) The development of the textile industry for the period of 2002 - 2010 is focused to the following: Strengthening weaving & knitting industry to support competitiveness of apparel industry. Strengthening supporting industries such as dyeing, accessories, spare-parts, et cetera. Export will be based on garment & apparel, yarn and fabrics. Developing synthetics fiber industry having high value added and special purposes. Develop high level managerial capabilities in the both the management of textile and garment industries. Management of quick response system (QRS) and just-in-time, design & merchandising capabilities. DEVELOPMENT STRATEGY:  DEVELOPMENT STRATEGY Revitalizing the industry through financial and fiscal supports for textile/garment industry. Increasing utilization of production capacity, efficiency and competitiveness through : - industrial cluster approach for developing textile industry, - increasing local contents. - increasing application of new compliance rules in quality standards and others such as SA-8000/WRAP, Eco-Label, EMS, ISO 9000 series, et cetera. DEVELOPMENT STRATEGY ……….. (Cont’d):  DEVELOPMENT STRATEGY ……….. (Cont’d) Optimizing export processing zone to boost export. Organizing trade mission and international exhibition (such as the up-coming Asian Global Resources or AGS in March 2003). CONCLUSION::  CONCLUSION: The Strategic Role of the industry is still dominant. Therefore, the industry is likely still function as a backbone of national economy. Sluggish growth of industry due to emergence of new strong players and world’s economy recession requiring integrative and comprehensive efforts to alleviate the problem. Entering post-WTO era, the competition is becoming more intense, and high skilled expertise & know-how developments is now the key success factor of the industry. Regional market integration leading to trade liberalization or AFTA. Also, developing Asian region will still function as huge market and tremendous supplier of world’s textile and apparel. Cooperation and strategic alliances are most likely to function as a survival kit for the industry in the future, particularly regional cooperations such as through this ASPAC-TCIF.

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