That’s according to Ade Sudrajat, chairman of the Indonesian Textile Association (API), who told Investor Daily on Tuesday that a diminished domestic demand due to the country’s crawling economy has led to goods piling up in warehouses and slashed production levels.
“There was no demand, so those factories cannot produce,” he said.
While the Indonesian Ministry of Industry in May unveiled a new plan aimed at boosting textile and footwear exports, local manufacturers are still struggling to compete with cheaper imports from China and South Korea in the domestic market.
Combined with a falling rupiah, which has depreciated about 13.6 percent against the U.S. dollar so far this year (making yarn and fabric imports more expensive), and rising electricity costs, it’s spelled disaster for the country’s garment industry: The Confederation of All Indonesian Workers’ Union (KSPSI) has said around 45,000 workers have been let go from textile and apparel factories in recent months and that number will likely increase.
Sudrajat suggested cutting the electricity tariff by 40 percent could help, as well as introducing trade barriers for certain textile imports in a bid to protect Indonesian manufacturers.
Last month, the government increased the duty on thousands of imported consumer goods, including coats, jackets, suits, blouses, shirts and T-shirts, but the domestic industry is still at risk, with no liberation in sight. The country posted its weakest economic growth since 2009 in the second quarter of the year and thousands of workers took to the streets in several cities on Tuesday to protest layoffs and demand higher wages.