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Stake Holder : Textile Industry Needs Fundamental Changes

The manufacturing industry is in an expansion phase. This is reflected in the manufacturing index released by several institutions.

IHS Markit, for example, noted that Indonesia's manufacturing Purchasing Managers' Index (PMI) in March 2021 reached 53.2, up from 50.9 in February 2021. This index is said to be the highest position in a decade of IHS Markit data collection since April 2011 .

Next, the release of Bank Indonesia (BI) also shows that the Bank Indonesia Prompt Manufacturing Index (PMI BI) ​​in the first quarter of 2021 has reached 50.01%. Previously, the BI PMI in the fourth quarter of 2020 was 47.29%.

Even so, the momentum for recovery is unlikely to be felt by all sectors of the manufacturing industry. Secretary General of the Indonesian Textile Association (API) Rizal Tanzil said that the average production utilization of the textile and textile products (TPT) industry actually fell to around 60% in the first quarter of this year.

"Previously (utilization) was at 70% 75%," said Rizal.

The culprit for the decline in utilization stems from the movement in oil prices. Rizal said, the increase in petroleum prices in the first quarter of 2021 caused the production costs of some rayon and polyester to rise.

In the aftermath, the prices of derivative products such as fibers, yarns, fabrics, to finished clothes or garments also experienced an increase. Unfortunately, the increase in the selling price of TPT was not matched by a significant increase in purchasing power, so that many products were not absorbed by the market.

"The market is stagnating, so automatically we also don't use the machine to be full. Instead of not being absorbed much, we will reduce it a little bit (utilization of the production machine)," said Rizal.

According to Rizal, the key to restoring the textile industry depends on whether the market is ready for existing products or not. Hence, he hopes that the purchasing power of the market and economic activity can increase along with the vaccination program.

Next, another factor that is also considered important in the recovery of the textile industry is the matter of protecting domestic products from imported products. Rizal said that currently imported goods still control a large market niche in the domestic market.

For garment products, for example, Rizal noted, the control of market share or the market share of imported products in the domestic market could reach 60%. Most of these imported products come mainly from China.

The cause of the dominance of the market share of imported products is due to the sizeable price difference. For baby clothes, for example, according to Rizal's record, the price difference between local products and imported products can reach 2-3 times.

"Online baby clothes (imported) can be around Rp. 15,000, local (baby clothes) at least Rp. 50,000," said Rizal.

Hence, he hopes, the government can protect the domestic market. According to Rizal, this can be achieved through the application of non-tariff barriers such as the implementation of safeguards and the imposition of SNI label obligations.