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Performance of Textile Industry 2007 and Forecast in 2008

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Title: Performance of Textile Industry 2007 and Forecast in 2008


1
INDONESIAN TEXTILE ASSOCIATION ASOSIASI
PERTEKSTILAN INDONESIA
  • Performance of Textile Industry 2007 and Forecast
    in 2008

Adhigraha Bldg. 16 th fl. Jl. Jend. Gatot
Subroto, Kav. 56 Jakarta 12950 Indonesia Tel.
62-21 5272171, Fax. 62-21 5272166 E-mail
sekretariat_at_bpnapi.org, callcenter_at_bpnapi.org busc
enter_at_bpnapi.org Website www.indonesiatextile.com

2
BUSINESS CONDITION 2007
NASIONAL MACROECONOMIC
Economic Indicators 2004 2005 2006 2007 (est)
Economic Growth () 5.13 5.60 5.50 6.00
Inflation () 6.40 17.11 6.60 6.38
Currency (Rp/US) 9.360 9.830 9.020 9.130
BI Rate () 7.40 12.75 9.75 8.00
Investment (Rp. triliun) 58.30 118.28 59.29 167.92
Goods Trade Balance (USD billion) 25.06 27.96 39.73 39.92
Non-oil Trade Balance (USD billion) 21.15 26.19 37.49 39.51
Number of Unemployment (million people) 9.80 10.70 11.70 12.70
Number of Poverty (million people) 36.20 35.10 39.05 45.70
Source BI, BKPM, BPS, Lipi procecced
  • The economic growth is still reduced by inflation
    and society purchasing power has yet to grow.
  • No spreading out of economic growth (still
    focusing on the non-intensive labor sectors)
    thus it has yet to reduce unemployment and
    poverty.
  • Performance of the real sectors (trade balance)
    are still hampered, and it has yet to be able to
    give good impact on the economic growth.

3
Domestic and World Textile Consumption
BUSINESS CONDITION 2007
Domestic Finished Clothes Consumption 2007 (Est.)
Total People Consumption US 268,17 billion
Finished Clothes Cons. (2,5) US 6,71 billion
Volume conversion (US 5,5/kg) 1.220.000 ton
Source BI, BPS processed
  • By value, finished clothes consumption declined
    but by volume the domestic consumption increased.
    Consumption per capita reached 5.3 kg (in 2006
    4,6kg/capita)
  • World consumption increased by 3.
  • World consumption per capita in 2007 about 8,48
    kg (in 2006 8,37kg/capita)

Source WTO, Otexa, Eurotex processed
4
National Textile Production Model of
Distribution 2007 (000 ton)
PERFORMANCE OF TEXTILE INDUSTRY 2007
  • Indonesia is still relying on export market by
    USA, EU and Japan as the main
  • export destination country.

5
Trade Performance (Export-Import)
PERFORMANCE OF TEXTILE INDUSTRY 2007
Trade Performance 2007 (Compared to 2006)
Sub-Sector Export Export Import Import
Sub-Sector Value (US billion) Volume (000 ton) Value (US billion) Volume (000 ton)
Fiber 0,3 (15 increase) 220 6 increase) 0,98 (24 increase) 705 (increase 18)
Yarn 1,89 (6,1 increas) 800 (1 increase) 0,23 (17,8 decrease ) 90 (decrease 29)
Fabric 1,44 (2 decrease ) 320 (0,6 decrease ) 0,44 (22 increase) 110 (increase 5,7)
Garment 5,97 (13,2 increase) 380 (1 increase) 0,15 (200 increase) 20 (increase 81)
Other product 0,46 (15 increase) 110 (10 decrease ) 0,25 (increase 177) 68 (decrease 21)
TOTAL 10,06 (6,4 increase) 1.830 (2,6 decrease ) 2,05 (increase 29,7) 993 (increase 4,6)
Source BPS (est) processed
  • Export value increased by 6.4 (has yet to meet
    growth target by 10 annually).
  • Export volume declined and the increase of export
    was driven by increase of unit price.
  • Importing clothing drastically increase.
  • Trade balance totaled US 8.01 billion (increased
    by 1.8 compared to 2006).
  • The world trade value of 2007 reached to USD 546
    billion, and Indonesia only dominated 1.8 of the
    total market share.

Source BPS
6
Domestic Market Condition
PERFORMANCE OF TEXTILE INDUSTRY 2007
  • Domestic market consumption increased by 20 to
    1.22 million ton.
  • The local products sales in domestic market
    declined by 42.9 to 260.000 ton and 22 share
    (far from the target of 75).
  • Import volume of clothing and other products
    increased by 72.
  • Import products dominated domestic market by 70
    share to 862.000 ton.

Source BPS, Ministry of Industry, BI, API
Compiled
7
Position in Intl Market
PERFORMANCE OF TEXTILE INDUSTRY 2007
INDONESIA POSITION IN USA MARKET JANUARY-OCTOBER
2007
  • Export to the US grew by 10 to US 4.32 billion.
  • Indonesias share in the US market was 4.39 (in
    2006 was 4.21 share).
  • The position declined 1 level to 5th, under
    Vietnam by share 4.62 (in 2006 3.74).

SHARE
8
PERFORMANCE OF TEXTILE INDUSTRY 2007
Position in Intl Market
INDONESIA POSITION IN EU-27 MARKET JANUARY-AUGUST
2007
  • Despite EU import increased by 1.2 but Indonesia
    export to the region declined by 1.2.
  • Indonesias share is 1 and the position is in
    the 8th in the EU countries.

SHARE
9
PERFORMANCE OF TEXTILE INDUSTRY 2007
Position in Intl Market
INDONESIA POSITION IN JAPAN MARKET JANUARY-NOVEMBE
R 2007 )
  • In 2007, Japan textile import increased by 3.3
    and Indonesia export rose by 2.1 to US 504
    million.
  • Indonesias market share in 2007 increased to
    2.9 (2006 1.8 share).

SHARE
Note ) Excl. EU-25
10
Inter-ASEAN Textile Trade
PERFORMANCE OF TEXTILE INDUSTRY 2007
Data ) Jan-Jun
Indonesia Export to ASEAN slowly increased by
3.3 and the import fast increased by 15, mainly
from Thailand and Philippines.
) Jan-Jun
11
Impact on National Economic
PERFORMANCE OF TEXTILE INDUSTRY 2007
TEXTILE CONTRIBUTION AGAINST THE GDP VALUE 2007
INDONESIA TEXTILE TRADE BALANCE (US billion)
Net Export US 8,01 billion Dom. Sales
US 1,97 billion Investment US
0,33 billion Total US
10,31 billion GDP 2007 US 423,69 Milyar
SHARE SURPLUS OF INDONESIA TRADE 2007 (TOTAL US
39.92 BILLION)
SHARE OF WORKER IN TEXTILE INDSUTRY AGAINST THE
NATIONAL INDUSTRY (97,58 MILLION)
  • Biggest foreign exchange earner from non-oil
    sector (2,4 to GDP)
  • Export surplus is always above US 5 billion
    annually
  • The biggest absorber of workers in manufacturing
    industry

15 Textile Garment (1,841,520)
12
TEXTILE BUSINESS CLIMATE 2008/2009 CHANCE,
CHALLENGE, OBSTACLE AND WORKING AGENDA IN TEXTILE
INDUSTRY
13
National World Economic
  • If target of 6.8 economic growth in 2008 can
    reachable and inflation can be reduced by 5, the
    societys purchasing buyer would increase. At any
    rate, government must focus on the sector driven
    to increase the economic growth. If not focusing
    on the increase of the manufacturing sector, the
    economic growth would be in appearance only since
    it cannot reduce number of unemployment and
    poverty.
  • Along with the increase of the world crude oil
    price reached to about USD 100/barrel, the world
    economic is expected to slow down. It will impact
    on the growth of trade volume and value
    (export-import. The decline of growth in the
    importing countries will also make the trade
    dropped.

14
Textile Consumption Supply-Demand
  • Optimistic assumption, if government can increase
    societys purchasing power, the textile
    consumption will grow to about 1.3 million ton in
    2008.
  • Despite not significant, the world textile
    consumption is predicted to remain grow and would
    be 56.6 million ton in 2008 by USA and EU as the
    main market.

Source WTO, Otexa, Eurotex processed
15
World Domestic Textile Market
  • Despite consumption grows, the illegal import
    will disturb market share of local products in
    domestic market. For that, share in the domestic
    market is predicted to remain under 25.
  • Growth of the world textile consumption will
    impact on the trade value. In 2008, the world
    textile trade will reach to US 565 billion.
  • China and India are still dominating world
    textile trade. China will be free from the
    safeguard measure and to be member of WTO.
    Indonesia will face other potential competitor
    such as Vietnam and Kampuchea those get rapidly
    growth in the garment industry.

16
World Domestic Textile Market
  • To increase competitiveness in the domestic and
    export, the government should focus on
  • Having trade cooperation (FTA) with the
    countries to be main export destination like USA
    and EU, like with Japan (IJ-EPA).
  • Activating ITPC as marketing agent of the
    national industry in cooperates with related
    associations relating to the effort to have
    market penetration.
  • Facilitating promotion like exhibition and other
    promotional activities in the countries to be
    main textile export destination, such as Textile
    World (EU), Magic Show (USA), ITAF, IFW, etc.
  • Handling problem of unfair trade competition, in
    which import goods can be easily imported and
    circulated to the domestic market.

17
Investment Machinery Modernization
  • Despite banking is still focusing on the
    government obligation savings however, some
    banks begins allocating funds to the textile
    industry.
  • Program of Increasing Machinery Technology in the
    textile industry drive textile manufacturers to
    modernize machines and expand production
    capacity. In 2007, the investment increased to
    US 300 million. This investment will impact on
    the performance of textile industry in the
    future.
  • In 2008, it is expected that there would be
    increase of investment of more than US 500
    million. The fund is allocated to modernize
    machines in the sectors of spinning and weaving
    and increase production capacity in knitting,
    finishing, and weaving.

18
Availability of Energy Supply
  • The energy supply from PLN has yet to meet the
    industrys demand.
  • The electricity base rate (4 cent/kwh) is
    competitive enough, but the applied rate (due to
    peak season program, multiuse, public lighting
    and VAT) makes no longer competitive (8 cent/kwh).

Textile industry has begun doing energy
diversification by building private power plant
using coal and gas as fuel source
Source API Compiled
19
Availability of Energy Supply
Government should focus on
  • Giving priority to primary energy (gas and coal)
    to meet the domestic energy demand.
  • Supporting industry to have energy
    diversification by making sure continuity of gas
    and coal supply to the industry.
  • Increasing efficiency for the PLN performance and
    building new power plant using domestic source of
    primary energy thus it can meet industrys need
    by competitive price.

20
Labor
  • The labor system cannot drive increase of
    workers productivity thus it declines
    competitiveness.
  • The Act No. 13/2001 especially for minimum wage,
    outsourcing, overtime, and severance pay, is
    still burdening industry (un-friendly business
    policy).
  • The Work Training Center has yet to be maximally
    used to increase workers productivity.

Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour) Average Cost for Labor 2007 (US/hour)
Indonesia 0,76 China 0,55 Vietnam 0,35
India 0,60 Pakistan 0,40 Bangladesh 0,35
Labor Productivity Rank 2005 Labor Productivity Rank 2005 Labor Productivity Rank 2005 Labor Productivity Rank 2005 Labor Productivity Rank 2005 Labor Productivity Rank 2005 Labor Productivity Rank 2005 Labor Productivity Rank 2005
Thailand 27 Malaysia 28 Korea 29
China 31 Filipina 49 Indonesia 59
Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source Source Min. Of Labor compiled from any other source
Company does training to increase workers
productivity, either done internally or makes
cooperation with the training institutions
21
Labor
API in cooperates with government should focus on
  • Revising the Act No. 13/2001 mainly in minimum
    wage, outsourcing, overtime, severance pay to
    make business more and more favorable.
  • Reactivating Work Training Center (BLK) as
    training institution to increase workers skill
    and productivity.
  • Supporting training and education centers to
    increase workers productivity. The centers can
    make cooperation with industry in arrange model
    of training and education.

22
Infrastructure
High-cost economy in transportation sector (from,
in and to the seaports)
  • The THC rate is more expensive compared to the
    ASEAN countries.
  • Access to seaports damage and traffic jam (cost
    and time of transportation is more and more
    increase).

Terminal Handling Charge Rate (US) Terminal Handling Charge Rate (US) Terminal Handling Charge Rate (US) Terminal Handling Charge Rate (US) Terminal Handling Charge Rate (US)
 Country 2004 2004 2005 2005
 Country 20 feet 40 feet 20 feet 40 feet
Indonesia 150 240 97 150
Singapore 110 160 110 160
Philippine 78 N/a 78 N/a
Malaysia 76 N/a 76 N/a
Thailand 40 N/a 40 N/a
Source Indonesian Shipowner Association
(DEPALINDO)
23
Infrastructure
To handle the problems in infrastructure, API and
government should focus on
  • Increase productivity and efficiency of the
    seaport performance to make quicker services and
    reduce THC of 20-feet under US 70/container and
    40-feet under US 100/container.
  • Improving access from and to the seaport to
    reduce traffic jam.
  • Drive investment in transportation sector (train)
    from industrial estates to the seaport. It will
    make transportation faster, safer and more
    competitive price.

24
TARGET OF THE TEXTILE INDUSTRY 2008
By above estimation and forecast, performance of
the textile industry in 2008 is targeted
  • Investment aimed at modernizing and expanding
    production will increase 5 of production
    capacity thus, the production utilization is
    targeted to be above 80.
  • By new investment, it is expected there would be
    growth by 5 of number of workers.
  • Import growth in the US, IJ-EPA and AJ-EPA,
    correction of the RMB value against the USD,
    political condition in Pakistan, industrial
    growth of home textile in Asia, and accurate
    promotional strategy are expected to drive growth
    by 10 of export.
  • The domestic market will be difficult to reach.
    At any rate, if the national textile industry can
    seize market share of uniform, the local products
    are expected to dominate 60 of the domestic
    market.

---- T H A N K Y O U ---
25
TARGET OF THE TEXTILE INDUSTRY 2008
Forecast of textile export by sub-sector in 2008
as follows
Total Export Growth 10 Fiber export
growth 0 Yarn export growth 10 Fabric
export growth 5 Ready-made wear 12 Other
textile export growth 6
Forecast of Textile Export Value of 2008 Total
US 11,06 billion Fiber Export value US
0,3 billion Yarn export value US 2,08
billion Fabric export value US 1,51
billion Ready-made wear export US 6,68
billion Other US 0,49 billion
26
T H A N K Y O U
INDONESIAN TEXTILE ASSOCIATION ASOSIASI
PERTEKSTILAN INDONESIA
Adhigraha Bldg. 16 th fl. Jl. Jend. Gatot
Subroto, Kav. 56 Jakarta 12950 Indonesia Tel.
62-21 5272171, Fax. 62-21 5272166 E-mail
sekretariat_at_bpnapi.org, callcenter_at_bpnapi.org
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