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| Total trade value of textiles and apparel between Indonesia and Japan dropped amid the global economic downturn |
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The textile and apparel industry is the largest export earner among non-oil/gas industries in Indonesia. With a total population of 232 million estimated by BPS-Statistics Indonesia, the country has also a potentially large domestic market, which has partially helped it weather the global economic downturn in face of weaker exports markets since late 2008. Domestic apparel market stood at 1.24 million tons in 2008, or US$7.18 billion in value, according to the Indonesian Textile Association (API) data. The association estimated the domestic market to grow about 10% amounted to 1.362 million tons at US$7.56 billion in 2009.
Closer economic ties with Japan
Japan is one of major trade partner for Indonesia. On one hand, investment from Japan since the early 1970s have boosted development of the domestic textile industry in Indonesia and continue playing a significant role for the Asian nation's economic growth to-date. On the other hand, Japan is an important export destination country for Indonesia's textile and apparel industry.
The European Union combining 27 member countries in a single common market was ranked second biggest importer of Indonesia's textile and apparel goods in 2008, accounting for about 20% of the total. From an individual country perspective, Japan was the second largest single-country buyer (US$547 million or 5% of the total) of Indonesia's textile and apparel goods after the US (37% of the total).
Main destination countries of Indonesian textile and apparel exports (Source: Indonesian statistical bureau) |
Economic ties between Indonesia and Japan grew stronger under the Indonesia-Japan Economic Partnership Agreement (IJEPA) effective from July 1, 2008.
In the field of manufacturing industry, Indonesia and Japan have developed a joint cooperation in Manufacturing Industry Development Center (MIDEC). The center is a capacity-building program for Indonesian manufacturing industries - including textiles, through joint studies, technical assistance, information exchange, and other activities.
Nonetheless, total trade value of textiles and apparel between Indonesia and Japan declined since the second half of 2008 through June 2009. The decline was mainly due to negative impacts brought by the global economic downturn, officials from Ministry of Trade said. These exports slipped 7.18% in the second half of 2008, compared with 2008 1H, and went further down by 16.71% in the first half of 2009 compared to the previous six months (i.e. 2008 H2).
Policies for manufacturing in need
Overall, the manufacturing sector of Indonesia was adversely impacted by the global economic downturn.
Indonesia's Central Statistics Agency (BPS) announced in November 2009 that large- and medium-scale manufacturing industries in the country grew only 0.02% in the first nine months of 2009 compared to the same period of the previous year. The Indonesian government pledged to revitalize the manufacturing sector starting 2010.
Industry Minister MS Hidayat, also the chairman of the Kadin, commented that to resurrect the manufacturing industry, areas of improvement would include infrastructure, such as gas and electricity. The decisions by state power utility PT PLN to shut off electricity in some areas, undermining and delaying industrial output, the country's business sector reported.
Overseas investors commented that improved access to finance and qualified labour force were crucial to Indonesia's investment climate and international competitiveness, according to a June 2009 report from the Federal Ministry for Economic Cooperation and Development of Germany. The report added that prudent macroeconomic management and sound sector policies could exploit Indonesia's comparative advantage, especially in labour-intensive manufacturing and agricultural products.
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