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INDONESIAN COMMERCIAL NEWSLETTER
MARKET INTELLIGENCE REPORT ON

WEAVING INDUSTRY IN INDONESIA
August 2007

Current Issue

The decline in the performance of the  country's  Textile and textile product (TPT) industry including weaving industry as indicated by sluggish  growth of production and sales shrinking is caused by inefficiency with machines too old to be fit for operation. The abolition of the export quota system by the United States and Europe as ruled by the WTO put the country's TPT industry face to face with giant rivals  mainly from China and India in lopsided market competition. The quota restriction had been a protection for weak market competitors like Indonesia against powerful rivals.

Around 80% the machines and equipment of the country's Textile industry have been more than 20 years in age. The country's weaving industry had 204,393 units of machines already aged more than 20 years.

Inefficiency has also compounded problem faced by spinning and knitting industries as well as garment industry. Around 5.03 million units of spinning machines, 34.743 units of knitting machines, 325 units of finishing machines and 226,854 units of garment making machines  are no longer fit for operation.

The country's textile industry also faces problem in the limited availability of basic materials such as viscose staple fiber, and cottons fibers for which the country still heavily dependent on imports.

Based on data the industry ministry, rayon fiber production from the only producers PT South Pacific Viscose and PT Indo-Bharat Rayon totals only 287,000 tons a year and 30% of which are exported. With domestic requirement of 250,000 tons, the country will have to import the shortage in supply of rayon fiber.

Early 2007, the government offered tax incentive for  textile industry. Textile producers urged the government for the inclusion of rayon fiver and polyester industry in the sectors receiving income tax facility.

The tax facility for the Textile industry is offered only to new investment in spinning, yarn, weaving, printing  and finishing industries and  garment  sectors.

Production capacity  tends to be stagnant

The production capacity of the country's weaving industry has not increased in the wake of the 1997/1998 crisis and the abolition of the export quota in 2005. Expansion of production capacity will require large investment as it will require not only construction of new facility but also replacing of old  inefficient machines.

As a result the country's production capacity  has remained stagnant. In 2003 the production capacity of the country's weaving industry dropped sharply to 1.724 million tons from  2.01 million tons in the previous year.

A number of producers of woven fabric have expanded their capacity but there are more factories forced to stop operation because of marketing problem. In 2004, the production capacity grew slightly to 1.778 million tons, but fell again in the following year to  1.777 million tons. 

Production of  woven fabric declining

The country's production of woven fabric has declined in the past several years mainly because of the condition of the machines.

Shuttle less looms (the products of modern technology) make up only 13% or 29,000 of the total number of 226,000 looms in Indonesia. The majority 87%  or 197,000 units are shuttle looms (old technology)  that could produce only  cloth grade A 25%,  grade B 30% and  grades C and D  45%.Modern machines could produce grade A up to 85% with the same production cost. The price of cloth of grade A generally is 15% higher than one of grade B.

In  2002, the production of woven fabric totaled 1.275 million tons up slightly to  1.274 million tons in 2003. In 2004, the production rose further to 1.312 million tons before declining to 963 tons in 2005 and to 946 tons in 2006. ...........................

MONTHLY REPORT

INDONESIAN  COMMERCIAL NEWSLETTER
       
August 2007

       

List of Contents

FOCUS: OPTIMISTIC 2008 DRAFT STATE BUDGET        1


INDUSTRY PROFILE:

DEVELOPMENT OF SPINNING INDUSTRY        8

  • Current issue        8
  • Characteristic of products        9
  • Production capacity and producers        10
  • Production declines        15
  • Investment        16
  • Supply and basic materials        16
  • Exports tend to fluctuate        18
  • Imports small        19
  • Consumption declined        19
  • Marketing        20
  • Government policy        21
  • Conclusion and prospects        22

INDONESIA'S WEAVING INDUSTRY        23
  • Current issue        23
  • Characteristics of products        24
  • Production capacity tends to be stagnant        24
  • Production of woven fabric declining        25
  • Utilization of machines of weaving industry declining        26
  • Rayon feiber, cotton and polyester filament requirement        27
  • Imports woven fabric tend to decline        27
  • Exports of woven fabric        28
  • Market size        28
  • Government regulation        29
  • Leading companies operating in weaving industry in Indonesia        32
  • Texmaco waiting for investor        34
  • Expansion and new investment        35
  • Conclusion and Prospects        36

COMPANY PROFILE:  APAC GROUP        37

FINANCE : FINANCING PROGRAM OF TEXTILE MACHINE RESTRUCTURING        42
  • Introduction        42
  • Textile factory machines outdated        43
  • Rp 9.82 trillion needed for textile machine restructuring        43
  • Financing scheme for restructuring program        44
  • New machines        45
  • Interest in restructuring high        46

INDUSTRY:
  • PRODUCTION OF PTA (PURIFIED THEREPHTHALIC ACID) STILL GROWING        49
  • COAL FOR FUEL IN TEXTILE INDUSTRY        54
  • SYNTHETIC FIBER INDUSTRY IN INDONESIA        60
  • GARMENT INDUSTRY STILL GROWING        68

CORPORATE NEWS IN BRIEF:
  • PT Dirgantara declare bankrupt facing potential loss        73
  • Antam needs US$ 1.5 billion to finance acquisition        73
  • Renault to build US$ 600 million car factory in Indonesia        73
  • Oentoro Surya to build shipyard in Batam        74
  • GE to invest US$ 700 million in coal gasification project        74
  • Telkom rejects call to acquire Inti        74
  • MNA starts operating Chinese MA60 Aircraft        75
  • Medco expands operting to Somalia        75
  • API II to team up with private co to build new cargo terminal        75

ECONOMIC NEWS IN BRIEF:
  • Trade with Russia expected to triple in value post Putins visit        76
  • Govt. dismisses warning of port boycott        76
  • Government announces progressive increase in CPO export tax        76
  • Government to regulated HRC imports to prevent monopoly        77
  • Control maintain on imports of rice and sugar        77
  • Foreign fishing vessels seeking new operation license        77
  • Countries asked to pay for oxygen produced by Indonesian tropical forests        78
  • United States and EU seek to prevent Indonesia domination of pulp market        78
  • Govt. to establish holding Co. for State plantation companies        78

APPENDICES:
  • Directory of textile company in Indonesia        79

ECONOMIC INDICATOR:
  • Consumer Price Index in Indonesia        83
  • Oil Prices        84
  • Foreign Exchange and Gold Price in Indonesia        85
  • The Indonesian Economic Trends        86

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