The textile industry and textile production (TPT) in the country are now in sorrow. PT Delta Merlin Dunia Tekstil (DMDT) - a subsidiary of Duniatex, one of the largest textile business groups in Indonesia - reported defaulting on a coupon payment obligation. This led S&P to lower its DMDT rating to CCC - or the equivalent of pulling out waste.

This incident has undoubtedly made many people wonder, what is actually going on with the textile industry in the country?

Secretary General of the Indonesian Fiber and Filament Yarn Association (APSyFI) Redma Gita Wirawasta when met, recently, made openings regarding the latest textile industry in Indonesia.

Redma said that the impact on the textile industry began in 2007 and 2008. At that time, China's textile industry decided to expand on a large scale. The development of the textile industry in the country of the Bamboo Curtain turned out to be a harsh blow to the local textile players, especially the fabric industry. Since then, to be precise in 2009 imported fabrics from China have slowly flooded the Indonesian market.

The impact of the entry of Chinese textiles continues to increase from day to day, month to month, year to year. Based on APSyFI data processed from BPS, the average national textile import growth in the last 10 years has skyrocketed by 10.4% to reach US $ 10.02 billion in 2018.

In fact, the average export growth in the same period grew by only 3% to US $ 13.22 billion. As a result, Indonesia's textile trade balance has also shrunk by half, from a surplus of US $ 6.08 billion in 2008 to only US $ 3.2 billion last year.

"Now this is what makes our textile industry unhealthy from 2007 to 2008 until now, except in garments because they can still export using imported fabrics," he said.

APSyFI data also explains that the textile trade performance in 2018 was the worst in history because exports only grew by 0.9%, while imports grew by 13.9% so that the textile trade balance was a deficit of 25.6%.

According to Redma, this condition was created because of the Minister of Trade Regulation Number 64 of 2017 concerning Provisions for the Import of Textiles and Textile Products. In this policy, the government gives the green light to traders (API-U) to import textile raw materials through the Bonded Logistics Center (PLB).

This condition causes products from the upstream industry, especially in the fabric manufacturing sector, to be less competitive with imported fabrics and less absorbed by the downstream garment industry. Redma said that currently the production utilization in the weaving, knitting and dyeing sectors is only around 40%.

APSyFI also believes that if this condition continues, within the next three years, TPT will experience a trade balance deficit threat. APSyFI estimates that in semester I-2019 imports will increase by around 7% year on year (yoy) or worth US $ 4.4 billion, while the trade balance is predicted to be depressed to US $ 2 billion.

Limit Imports or Flood of Incentives

To improve the textile industry business climate, Redma assessed that the government could make several efforts such as providing incentives to enable domestic textile companies to compete with foreign companies or other steps to impose restrictions on imported goods.

The incentives that should be issued by the government to save the textile industry can be done by providing incentives for gas tariffs, ease of distribution, and quality of human resources. He hopes that the gas tariff can be lowered to the price of US $ 6 per MMBTU from the current price range of US $ 9 per MMBTU in order to boost the market competitiveness of textiles and textile products.

In addition, the government can take decisive steps to limit imports of raw materials. If the government can restrict imported materials from entering, domestic demand will shift to local textile companies.

Redma proposes to the government to tighten imports of a number of products that can be produced by domestic producers, especially for products HS 52 Woven Fabrics from Cotton, HS 54 Woven Fabrics from Synthetic Filament Yarns, HS 55 Woven Fabrics from Synthetic Staple Fiber / Viscose Rayon to HS 62 Non-Knitted Apparel and Apparel Accessories.

Because these products can be produced domestically, imports should only be carried out by API-P who obtain P-textiles on the condition that they are used for their own raw materials, not for sale.

"So, we don't need to import fiber such as viscose because it can be fulfilled from within the country," he said.

Currently, continued Redma, the utilization rate of textile companies is only 65%. To make matters worse, the utilization of fabric manufacturing plants is only 45%, down far from 2017 which was still 55%.

"If the domestic market can be regulated, it can suppress imports, the balance can be positive again," he added.

He also believes that if the tap on textile imports is tightened, the needs of 260 million Indonesian citizens will be fulfilled by TPT companies, one of which is Asia Pacific Rayon (APR). The company, which is part of the Royal Golden Eagle (RGE) group of companies, produces viscose rayon and is biodegradable for use in textile products. The company has also invested IDR 11 trillion to build a factory with a capacity of 240 thousand tons of viscose-rayon per year.

"Two years ago, viscose production was still in deficit, we used to import 150 thousand tons. Whereas demand was 300 thousand tons. The presence of APR also fulfills local demand, so it's already balanced," said Redma.

Asia Pacific Rayon (APR), which is the first integrated viscose-rayon fiber producer in Indonesia, is committed to supporting the development and competitiveness of the domestic textile and fashion industry in the international arena.

Some time ago, Minister of Industry Airlangga Hartarto also said that the presence of APR as a producer of viscose-rayon fiber has had a very positive impact in reducing the current dependence on imports of raw materials as well as enriching the Indonesian textile industry.

"We appreciate APR's investment and commitment that has supported the government's agenda for the national strategic industry, namely the textile and textile products sector so that they can compete more in the global market," said Airlangga.