Wednesday, April 24, 2024 | 04:46 WIB

Brightening gloomy countenance of Indonesian textile industry

IO – Textiles are one of the oldest worldwide industries, first found around 5000 B.C. in Egypt. In the 1500s, the first textile manufactory effectively started up in England, and rapidly flourished after Richard Arkwright invented the spinning machine in 1769. The textile and textile product industry (TTPI) is said to pass through three phases of international product cycles. In the 1950s to 1960s, TTPI production shifted to Japan, after initially being carried out in North America and European countries. In the second phase, TTPI production reallocated to three other Asian countries: Hong Kong, Taiwan, and Korea. During the most recent, third, chapter, it was started up in developing Asian countries like China, Indonesia, Thailand, Malaysia, the Philippines and Sri Lanka, from the 1990s. In the 1980s, Indonesian TTPI also experienced a “golden era” associated with supportive involvement from the government strategy orientation in strengthening import-substitution industrialization. At that time, the government wisely stimulated calico and yarn manufacture; textile manufacturers could thus produce synthetic fiber and being an overseas export drive in the mid-1970s. The Statistics Indonesia (BPS) reported how value-added TTPI manufacturing aggressively increased from the 1970s to the 2000s, moving from 16.70 percent of exports from 1970-1979, 13.65 percent from 1980-1989 and 17.94 percent from 1990-1999 period. Having thus peaked, it started to weaken in the 2000s, dipping to 12.70 percent in 2000-2009 and to 10.65 percent from 2009-2016.

Such a slump in Indonesian TTPI can be explained by several factors. First, decreased TTPI productivity, as the machinery involved has become obsolete. This is indicated by the low utilization capacity of TTPI in 2018 at only 49 percent, whereas other TCI-exporter countries such as China, Vietnam, and Bangladesh reported 78-80 percent, 70-80 percent, and 80-84 percent utilization of installed machines respectively (IKATSI, 2019). Second, textile-related skills in Indonesia remain low, compared to other TTPI-exporter countries. IKATSI data shows that in 2018 there are only 10 majors and 12 courses of textile-related education facilities in Indonesia, while other TTPI-exporter countries, such as the United States, India, Pakistan, Europe, and Bangladesh number 111, 108, 60, 48, and 37 textile-related educational facilities, respectively. Third, the Indonesian marketplace has been flooded with imported-TTPI products dumped from overseas after the government loosened imports, through the Trade Minister (PERMENDAG) regulation number 64/2017. Consider how the previous regulation, PERMENDAG number 85/2015, stated that only TPT producers could import raw materials and were not allowed to trade them while PERMENDAG number 64/2017 grants import licenses to permit holders, also known as general importers. Therefore, it is not surprising that the trade performance of Indonesian TTPI has continuously suffered from a widened trade deficit, as the import magnitude is not well-balanced by the volume of garment exports. Last, Regulation of Environment and Forestry Minister number P.93 / MENLHK / SETJEN / KUM.1 / 8/2018 concerns excessive regulation on wastewater quality – considerably more restrictive than in other countries.

Confidence that the Indonesian textile industry can regain a golden era is not impossible if we learn a lesson from China, one of the largest TTPI producers in world-wide. China’s textile market share in Asia is approximately 39.4-70.8 percent (Sheng Lu, 2018). Similarly, China also experienced hard times, similar to Indonesia. Zhang, Kong, and Ramu (2015) show that China’s textile industry also had a low level of productivity. From 1949 to 1978, China’s textile industry was completely overhauled, moving from an old-style industry into a modern one (Qiu, 2005). However, every phase of institutional reforms effectively spurred the average annual growth of China’s textile industry, which is marked 14 percent of exports from 1978 to 2000. Furthermore, China’s institutional arrangement provided a supportive incentive to strengthen China’s textile industry, effectively transmitted through two hand-in-hand channels: technological upgrading (i.e., machinery adaptation, training, organizational evolution, and so on) and enhancement of international trade integration (i.e., restriction of imports, support for exports, international trade deals). In addition, to expedite technological upgrading, China’s government focus provided an incentive for foreign direct investment (FDI) in China’s textile industry. China’s government also focused on domestic supply chains and import-substitution policies earlier, then gradually transformed these into export-oriented policies in the early 2000s through intensification of trade deals. As such, it is not surprising that China’s textile industry was progressively enhanced, not only in the domestic market but also in international competitiveness.

The collapse of the Indonesian textile industry demands positive government policy to brighten the face of Indonesian TTPI. The TTPI market is still large; at least, Indonesian TTPI producers can take advantage of it, given a proper rescue strategy. First, good branding to demonstrate that the Indonesian TTPI industry is not a sunset industry but rather a sunshine industry. Second, enhance the competitiveness of human resources, by boosting textile-related education in Indonesia. Third, the government should provide fiscal incentives for the textile industry in order to rejuvenate and revitalize production machinery. Fiscal incentives can also be given to the textile industry, using local raw materials for import substitution motives. Fourth, we should create patents to protect Indonesian textile products (such as batik) so they cannot be freely copied by other producers abroad. Fifth, PERMENDAG number 77/2019 which is planned to be issued as a revision of PERMENDAG number 64/2017 should provide better protection for the Indonesian TTPI industry – for instance, protection through import duty tariffs, regulation of import licensing procedures, linking these to export quotas as well as levying additional duties on imports. Finally, regulations should be able to attract more foreign direct investment to the Indonesian textile industry, in order to increase productivity and compete with other countries.

SOCIAL CULTURE

INFRAME

LATEST ARTICLE

POPULAR