Development of weaving industry.
Development of the country's weaving industry has been sluggish on weak competitiveness. The country's weaving industry has been less competitive as the industry still uses old machines. Around 82% or 204,392 of 248,957 units of the machines used in the country weaving industry have been too old and need replacement. 248.957 unit.
Investment in machines with government facility under revitalization program is relatively small. In 2009, a company proposed only an investment of Rp10 billion or Rp1.767 trillion by 191 companies. In the past two years, a number of big companies have carried out revitalization program to improve productivity.
The production capacity of the country's weaving industry has not changed from 1.9 million tons per year since 2010, but production grew 7.9% to 1.3 million tons in 2011.
In global market, the country's products of woven fabric have to compete sharply against other major producers of textile and textile products such as China, Vietnam, India and Mexico, espe3cvially in European Union and US markets. In the US market Indonesia is the fifth largest supplier. China dominates US imports of textiles and textile products with a market share of 35%, with Vietnam following with a market share of 5.82%. India has a market share of 5.44%, and Mexico 5.31% and Indonesia 4.55%. The US market value is around 25% of the global textile market value of US$93.18 billion
The Indonesian Textile Association (API) said the government's plan to raise the electric tariff by 10% early next year would further weaken the country textile industry. Energy accounts for 18%-20% of the production cost of the industry. It is estimated the production cost in the upstream textile industry would rise 2% in 2013. The production costs for synthetic fiber is estimated to rise 2%, spinning cost up 2.2%, weaving cost up 2.5% and garment making cost up 10%. The increase in production cost will force the textile producers to raise their selling prices.
Characteristics of Product
Woven fabric is an intermediate product in textile industry. Woven fabric has yet to go through the process of dyeing, printing, finishing, and garment making. Woven fabric is produced from a number of basic materials including yarns and mono filament yarns. Fabric from polyester mono filament yarns will have a 100% content of synthetic yarns and fabrics from spun polyester staple fiber and viscose fiber, cotton fiber and acrylic yarns will have contents of various synthetic and natural fibers.
The production capacity of weaving industry has remained small because of little investment in the sector. This sector has not gained much from the revitalization program in the textile industry.
In 2006, the production capacity of the weaving industry was recorded at 1,777 tons per year. The capacity declined 2.5% in the following year to 1,773 tons. In the following years, there was no much change in the production capacity. In 2008, the capacity rose only 1 % to 1,750 tons per year.
In fact the production capacity tended to decline with some of the old machines scrapped for being inefficient.
A new machine with the same capacity could produce up to 900 yards of fabric per hour as against only 650 yards by an old machine. In addition, old machines waste much energy.
Only big producers have made new investment in new machines. Small and medium companies still use old machines resulting in a decline in total production capacity. Most or 170 of 190 textile and textile product (TPT) companies proposing for the credit facility to buy new machines to the industry ministry in 2009 are medium to larger scale producers through scheme I. Only 20 companies were categorized as small producers through scheme II.
There has been no new producers to increase the production capacity of I the country's weaving industry over the past several years. The main producers remain the same old big companies.
The main players in the weaving industry are those operating integrated facility producing textiles and textile products (TPT). They include PT. Apac Inti Corpora with a production capacity of 80 million meters of greige fabrics/ year and 60 million yards of denim per year. Apac jalso produces textile basic materials in yarns totaling 482,000 bales per year.
PT. Argo Pantes, Tbk. has a production capacity of 87.5 million meters of fabric per year. Argo Pantes is a member of the Argo Manunggal, which also has 17 other TPT companies producing yarns , fabric and garments.
PT. Argo Pantes, Tbk is a publicly traded company of the Argo Manunggal. Group, which has a number of other lines of business such as steel, poultry, property, mining , energy , PVC pipes , insurance and plantation.
This company group was an embryo of a textile company established by The Nin King in 1949. The textile business was later expanded into an integrated industry. Argo Pantes was listed on the Jakarta Stock Exchange in 1991.
PT. Argo Pantes has a total production capacity of 34,362 tons of yarns per year, yarn processing capacity of 1,440 tons per year, greige 42,800,000 yards per year and fabric processing capacity of 44,167,000 yards per year.
The largest shareholder of Argo Pantes is Dharma Manunggal holding 29.35% , followed by The Ning King as a 10.08% shareholder, Maximus Capital. Pte. Ltd 8.18% and PT. Primasia Securities 5.54%
Argo Pantes recorded a 28% increase in sales in 2011 to Rp 848.3 billion from Rp660.3 billion in 2010. Exports contribute 70% to its total sales. In 2011 its exports were valued at Rp344.8 billion, up from Rp290.9 billion in 2010.
Its main export markets are Asia Pacific countries and accounting for 23.47%, Europe accounting for 6.62% and the United States accounting for 10.30%.
In the past two years, Argo Pantes recorded losses. It suffered a loss of Rp.125 billion in 2010 and Rp.108.5 billion in 2011.
The losses were smaller in 2011 as the company succeeded in increasing sales and cutting foreign exchange loss. Its cost of goods sold was recorded at Rp 918.9 billion in 2011, up from Rp 660.6 billion in 2010 and its operating cost rose to Rp 27.7 billion from Rp 27.6 billion in 2010. Its equity fell to Rp103.4 billion in 2011 from Rp 211.9 billion in 2010 because of larger deficit of more than Rp 200 billion.
PT. Bintang Agung
The company was established in 1963 in Padalarang, West Java with an initial capacity of 1,920,000 meters per year. In 1975 the production capacity was expanded to 8,400,000 meters / year.
In the period of 1975 to 1995, PT. Bintang Agung had a new facility to produce corduroy and denim. Currently it has a production capacity of 72,738,000 meter/ year.
PT. Indonesia Taroko Textile (Inta-Tex)
Inta Tex was established in 1990 when the country's textile exports hit a record high. In started operation in 1992 with a capacity of 36 million yard/ year. Inta Tex is a joint venture between a Taiwanese company and the Tjia Lam Seng Group.
In 1996, its production capacity was expanded to 60 million yards/ year. Inta Tex has weaving machines--603 water jet looms (316 units with dobby) in its complex over 12 hectares of land in Purwakarta, West Java.
Inta Tex has a power plant with boiler and heating system.
Its products include nylon and polyester cloth supplied to shoe producers such as those of Adidas, Champion Products, Lotto , Nike, Puma, Reebok, Wal Mart, Woolworths Trust.
Sunson Textile Manufacturer
PT. Sunson Textile Manufacturer, Tbk was established in 1972 with the name of PT Sandang Usaha Nasional Indonesia Tekstil Industri in Bandung, West Java.
Sunson operates integrated textile industry producing yarns, fabric and other textile products. It also has a trading unit. It started commercial operation in 1973. It has a production capacity of 32.3 million meters of Sunson fabric a year.
The biggest shareholder of Sunson is PT. Sunsonindo Textile Investama which owns 40.99% of the company. Other shareholders are East Rise Capital Limited (15 %), Easefull Enterprise Ltd (14%), and Sundjono Suriadi (5%).
Sunson's net sales was recorded at Rp.345.5 billion in 2011. In the first nine months of the year its net sales already reached Rp 336.billion.
The company exported around 37% of its production in 2011, and in 2012 exports make up 41.8% of its total sales.
Total net sales of the company reached Rp345. 5 billion in 2011 including sales of products of spinning and Rp 269 billion, woven product Rp 67.5 billion and other products Rp 9 billion.
PT. Sunson Textile posted Rp.12.3 billion in profit in 2011 and an estimated Rp 10.3 billion in 2012.The assets of the company dropped from Rp 872,457 billion in 2010 to Rp 843,450 billion in 2011.
PT. Roda Vivatex, Tbk
The company is located in Bogor, West Java. Roda Vivatex started commercial operation in 1983. Its lines of business include textile industry producing fabric and, trading and share investment.
Its textile products are partly exported to Europe, the United States and other Asian countries including Middle East.
The company owns 99.99 % of PT Chitatex Peni (CP), which has a factory in Karawang, West Java. CP has business units in construction, real estate, trading business, printing, transport, workshop, mining, forestry, plantation, agriculture, livestock farming and fishery.
Roda Vivatex is 37.99% owned by PT. Geno Tatagraha, 37.24% by PT.Geno Intiperkasa, 6.73% by Ubs Ag Singapore Non-Treaty Omnibus Account--209114409, and the rest by the public and other shareholders.
PT. Roda Vivatex, Tbk recorded an increase in sales to Rp 295.9 billion in 2011 from Rp 260.8 billion in the previous year.
Its profit, however, declined 33,5 percent to Rp113.9 billion in 2011 from Rp. 170.8 billion in 2010. See the following table.
Production up Slightly
As an intermediate industry, development of weaving industry depends much on the condition of its downstream sector, the garment industry. The country's garment making industry has tended to be flat in the past several years on weak demand from the US and European market.
The country's production of textile has declined 0.2% a year on the average. In 2008 and 2009, the production dropped 4.6 percent and 14.8 percent to 1,299,000 tons and 1,107,000 tons respectively. The decline was caused mainly by an increase in production cost which was pushed by an increase in the price of filament since early 2008.
In 2010, the production grew significantly 10.7 percent to 1,225,000 tons and in 2011, the production grew further 7.9 percent to 1,324,000 tons.
Indonesia's exports of woven fabric have declined especially to major markets the United States and Europe--on weak demand amid the global crisis. The decline was also caused by low competitiveness of old factories. Revitalization has not succeeded in improving the competitiveness of the country's TPT industry as not all TPT producers have replaced their old machines.
Indonesia has to compete against Vietnam and Bangladesh in export market. Vietnam has boosted its TPT industry over the past several years. Investment in TPT industry in Vietnam grew 20% per year and in Bangladesh grew 16% as against a growth of only 8% in Indonesia.
In 2009, the country's exports of woven fabric totaled 40,941 tons down to 20.5 percent to 32,543 tons in 2010 as a result of the global crisis. Demand for the US and European markets declined sharply.
In 2011 exports began to rise to reach 67,171 tons as shown in the following table.
Imports Up On Growing Downstream Industry
In the past five years, Indonesia's economy grew fairly strongly by 5.5 percent to 6.5 percent amid the global slump. The growth was driven mainly by the consumption sector. The economic growth boosted development of a number of economic sectors including garment industry resulting in growing demand for basic material in the form of woven fabric.
Imports of woven fabric, therefore, increased on shrinking domestic production amid declining weaving industry. The import products are quite competitive in prices, promoting garment makers to use imported fabric.
In addition, many domestic producers of woven fabric especially small and medium producers were facing financial problem to resume operation. Many banks have not believed the country's textile industry are worth credit. Some of the banks are still haunted by the trauma of big non performing credits in the textile industry in the wake of the 1997/1998 monetary crisis.
In 2009, imports of woven fabric reached 52,295 tons valued at US$422 million, up 91,2 percent to 99,964 tons valued at US$ 869 million in 2010. In 2011, imports dropped 69.2 percent to 30,802 tons, but rose again sharply in 2012. In the first seven months of 2012, imports already reached 62,652 tons valued at US$ 250 million.
The surge in imports was mainly in imports from China, which turned to other markets including Indonesia as it was in difficulty to exports to the United States and Europe when demand dropped sharply as a result of the global crisis. The country's garment production grew 3.3 percent in 2011.
The country's production of woven fabric has tended to decline but the domestic consumption has continued to increase--up 7.1 percent per year in the past three years.
Consumption of fabric was estimated at 1.16 million tons in 2009, up 5.1 percent to 1.22 million tons in 2010, and rose further 7.8 percent to 1.32 million tons in 2011. See the following table.
Protection of Domestic Industry
The country's TPT industry needs protection otherwise, the domestic market could be dominated by imported products. In the past three years, imports of TPT have increased sharply especially from China.
The government has issued a series of protective regulations on TPT imports. In 2008, a regulation of the trade minister No. No. 56 allowed only registered importers to import certain consumer products including electronic goods, food and beverages, finished wear, footwear and toys.
Registered importers are importers with special approval from the government to import certain commodities. The importers are required to report their imports to the government.
The government also allows imports of those commodities via certain seaports and airports including: Belawan of Medan; Tanjung Priok of Jakarta; Tanjung Mas of Semarang; Tanjung Perak of Surabaya; and Soekarno Hatta airport, , Makassar; and other international airports.
In addition, verification is needed for the commodities before being loaded into a ship in the ports of countries of origin.
The regulations are expected to curb imports to protect domestic producers. According to the industry ministry, implementation of the trade minister's regulation succeeded in reducing illegal imports of TPT from 17 percent in 2008 to 15 percent in 2009. Imports of TPT in 2008 surged including illegal imports such as import of used garments, imports of which have been banned since 2002.
A number of TPT companies have increased their production capacity to meet growing demand in the world market. They use new machines to replace old ones to improve efficiency and competitiveness.
PT. Argo Pantes in 2010, replaced its old machines with an investment of US$ 8.9 million using new spinning machines with a capacity of 33,120 spindles and US$602,200 to replace old weaving machines with a capacity of 1,200,000 yards per year.
With the use of new machines, PT Argo Pantes succeeded in increasing its production of yarns to 26,091 tons from 20,650 tons in the previous year and production of greige to 11,496,000 yards from 10,129,000 yards in the previous year.
Prospects and Conclusion
The country's production capacity for woven fabric has remained flat at around 1.9 million tons per year since 2010. Production, however, rose 7.9% per year to 1.3 million tons in 2011 from 1.2 million tons in the previous year.
Around 82 percent of the weaving machines have been too old more than 20 years, making it difficult to compete in the global market facing China and Vietnam and Bangladesh which use relatively new machines.
Only a few producers in the country have replaced their old machines. One of the producers is PT Argo Pantes which invested US$9.5 million in 2010 in new machines.
The export prospects are still gloomy in 2012 although a slight increase has been recorded in the first half of the year over the same period last year. Meanwhile, the domestic market of woven fabric is predicted to grow 5 percent 7 percent.
Table-18 Woven fabrics by basic materials Characteristics of basic Types of product Types of basic material materials Woven fabric Polyester Filament Synthetic, not fibrous Yarns from: Synthetic fibrous or Polyester staple fiber natural fibrous or blend Cotton of synthetic and natural Acrylic Viscose fiber Sources: API Table--19 Weaving production capacity, 2007-2011 (tons/year) Year Production capacity Growth (%) 2007 1,733,767 -- 2008 1,750,000 1.0 2009 1,886,858 7.8 2010 1,918,598 1.7 2011 1,938,361 1.0 Sources: Textile and multifarious industries directorate Table--20 Indonesia's main producers of textiles Players Production capacity (000 yards per year) PT. Apac Inti Corpora Greige Fabrics 80.000 Denim 60.000.000 yards PT. Argo Pantes 86,967 PT. Bintang Agung 72,738 PT. Sri Rezeki Isman 69,569.5 PT. Bumi Angkasa Tex Industry 68,750 PT. Jasa Sandang Raya 60,000 PT. Indonesia Taroko Textile Corp 54,800 PT. CV Sinar Sari 52,750 PT. Trulindo Mulia Perkasa 48,000 PT. Safarijunie Textindo Industry 46,480 PT. Kanebo Tomen Synthetic Mills 48,000 PT. Centex 32,846.4 PT. Samcro Hyosung Adi Lestari 40,000 PT. Eratex Djaja 33,940 PT. Sunson Textile Manufacturer 32,300 PT. Indorama Syntetics Indonesia 30,000 PT. Suryadani 30,000 PT. Tritama Textindoraya 24,000 Sources: Industry Ministry, processed Table--21 Production capacity and real production of PT Argo Pantes and subsidiaries, 2010 and 2011 Type Production Real production Production capacity In 2010 in 2011 Yarn (tons) 34,362 29,050 26,091 Yarn processing (tons) 1,440 455 506 Greige (000 yard) 42,800 19,127 11,496 Fabric processing (000 yard) 44,167 15,301 13,221 Sources: PT. Argo Pantes Table--22 Shareholders of PT. Argo Pantes per 2011 Shareholders % Dharma Manunggal 29.35 The Ning King 10.08 Maximus Capital Pte. Ltd 8.18 Primasia Securities, Pt 5.54 Other 3.89 Public 42.96 Sources: Indonesia Stock Exchange, processed Table--23 Exports of PT. Argo Pantes, 2011 Market 2011 (Rp million) Share (%) Asia 199.103 23,47 Europe 56.172 6,62 The United States 87.391 10,30 Other countries 2.151 0,26 Total 344,8 Sources : Financial report of PT. Argo Pantes Table--24 Financial balance of PT. Argo Pantes (Rp. million) Components 2011 2010 Current liabilities 290,768 324,297 Noncurrent liabilities 1,058,680 892,032 Capital 103,423 211,904 Assets 1,452,871 1,428,234 Sources: Financial report of PT. Argo Pantes 2011 and 2010. Table--25 Shareholders of PT. Sunson Textile Manufacturer, Tbk, 2011 Shareholders % PT. Sunsonindo Textile Investama 40.99 Foreign investors 35.72 PT. Kustodian 12.75 Public 5.37 Sundjono Suriadi 5.17 Sources: Indonesia Stock Exchange, processed Table--26 Net sales of PT. Sunson Textile Manufacturer, Tbk (Rp million) Sales Up to Sept 2012 % 2011 % Ekspor 140,380 41,8 127,649 36,9 Domestik 195,656 58,2 218,896 63,1 Total 336,036 100,0 345,545 100,0 Sources: Data consult Table--27 Net sales of PT. Sunson Textile Manufacturer, Tbk By types of products (Rp million) Types of product Sept 2012 % Sept 2011 % Spinning 261,700 77.9 269,028 77.9 Weaving 63,164 18.8 67,463 19.5 Other products 11,172 3.3 9,054 2.6 Total 336,036 100 345,545 100 Sources: Data consult Table--28 Financial report of PT. Sunson Textile Manufacturer, Tbk 2010 and 2011 (Rp million) 2010 2011 Current liabilities 238.460 256.794 Noncurrent liabilities 310.824 287.581 Capital 323.173 229.075 Assets 872.457 843.450 Sources: Konsolidated Finance Report Table--29 Shareholders of PT. Roda Vivatex, Tbk, 2011 Shareholders % PT.Geno Tatagraha 37.99 PT.Geno Intiperkasa 37.24 Ubs Ag Singapore Non-Treaty Omnibus Account--209114409 6.73 Lain-Iain 1.03 Public 17.01 Sources: Indonesian Stock Exchange, processed Table--30 Summary of financial report of PT. Roda Vivatex, Tbk, 2010 and 2011 (Rp billion) Description 2010 2011 Liabilities 137.9 253.9 Capital 714.4 828.3 Assets 852.4 1.082 Sources: Financial report of Roda Vivatex Table--31 Production of woven fabric , 2007-2011 Production Year (000 tons) Growth (%) 2007 1,362 -- 2008 1,299 -4.6 2009 1,107 -14.8 2010 1,226 10.7 2011 1,324 7.9 Average growth -0.2 Source: Industry Ministry Table--32 Exports of woven fabric, 2009--2012 * Volume Value Year (tons) (US$ 000) 2009 40,941 207,437 2010 32,543 198,841 2011 67,171 284,281 2012 * 20,373 144,154 Sources: BPS Note *: January-July Table--33 Imports of woven fabric, 2009--2012 * Year Volume Growth Value Growth (tons) (%) (US$ 000) 2009 52,295 -- 422,941 -- 2010 99,964 91.2 869,473 105.6 2011 30,802 -69.2 393,133 -54.8 2012 62,652 103.4 250,284 -36,3 Sources: ICN Note * January-July Table--34 Indonesia's consumption of fabric, 2009-2011 (000 tons) Year Production Imports Exports Consumption 2009 1,106,513 99,964 40,941 1,165,536 2010 1,225,742 30,802 32,543 1,224,001 2011 1,323,801 62,652 67,171 1,319,282 Sources: ICN processed