Indonesia’s textile and apparel industry is a well-established, labor-intensive, export-oriented sector that makes a huge contribution to the country’s GDP and employment. Indonesia has become one of the world’s top ten largest textile and garment producing countries, thanks to its continuously growing textile exports. Now, the industry has achieved new success, as export value has witnessed even further growth.
According to the latest figures revealed by Indonesia’s Industry Minister, Airlangga Hartarto, Indonesia’s exports of textiles and textile products were valued at US$2 billion in the first two months of 2017, representing a 3% increase from the same period last year. Hartarto also stated that the textile and apparel industry in Indonesia is currently providing jobs for around 3 million people, accounting for over 17% of employment in the manufacturing sector. In 2016, investment in the country’s textile and apparel industry was worth US$563 million, with exports valued at US$11.87 billion.
The minister shows great optimism that Indonesia’s textile and apparel industry will be more competitive in the global market, especially as the industry has been integrated from upstream to downstream sectors. However, the industry still needs some revitalization as the majority of factories now use old machines, especially weaving and knitting factories. The machines need replacement as they are no longer efficient.
Meanwhile, textile and apparel producers in Indonesia believe that the US withdrawal from the TPP will work in their favour, as they can now compete at the same price point as other textile exporters, such as such as Vietnam and Malaysia. According to the Indonesian Textile Association, Indonesia is expected to export $4.8 billion worth of textiles and apparel to the US in 2017, accounting for 39% of Indonesia’s total textile and apparel exports. Compared to last year, the US market accounted for only 36% of the country’s textile and garment exports.
In order to further boost the country’s textile and apparel exports, the ministry plans to implement special regulations on fiscal incentives in the form of fiscal allowance for export-oriented labor-intensive industries, under which industrialists would have income tax discount for business expansion. The ministry is also seeking a comprehensive cooperation agreement with Europe and the United States for benefits such as better tax facility.
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