Local manufacturing industries are continuing to endure the effects of the global economic slowdown, with several sectors experiencing declines in export orders, business associations say.

Indonesian Textile Association (API) chairman Ade Sudrajat said Monday that starting from September orders from the United States and the European Union — the two key destinations for Indonesian textile exports — had declined and were forecast to decline further in the coming months.

“A number of retailers in export markets have reduced orders on fears of tumbling customer demand. As a consequence, we have revised our export growth target from 24 percent to 20 percent this year,” he told The Jakarta Post.

The API had said it aimed to reach earnings of US$12.2 billion this year. The US and European markets have 36 percent and 18 percent shares respectively of Indonesia’s total textile exports.

Cutting production activities due to declining demand could be part of textile producers short-term plans, he added.

Indonesian Footwear Association (Aprisindo) advisory board member Djimanto shared similar views, saying that until last week, local producers had yet to receive purchase commitments from the US and European countries — which formed 70 percent of total expected footwear exports for next year.

“We will, for example, negotiate the purchase orders with the America’s Footwear Distributors and Retailers Association [FDRA] and try to find a win-win solution, such as cutting our sales prices as a compromise,” he said.

Textile and footwear products are two of Indonesia’s main manufacturing products which contributed significantly to the country’s non-oil and gas exports, which from January to August this year reached $107.37 billion.

According to data at the Trade Ministry, exports of textile products during January-August period reached $7.4 billion, a 16.4 percent increase from $6.4 billion from the same period in 2010.

Exports of footwear products in the first eight months of this year, valued at $1.6 billion, a 15.6 percent increase from $1.4 billion in the corresponding period last year.

The Indonesian Chamber of Commerce and Industry (Kadin) vice chairman for monetary, fiscal and public policy Hariyadi Sukamdani said that while the efforts to diversify export markets would take a longer time to materialize, local stakeholders needed to respond quickly by securing the domestic market first.
“We need to optimize non-trade barriers, such as using the Indonesian National Standards (SNI), anti-dumping and safeguard duties to protect local markets from cheap imported products,” he told the Post, adding that both industrial players and the government needed to be more responsive to surging imports.

The government is eyeing emerging markets in Africa such as Nigeria and South Africa to offset the economic slowdown in developed countries.
An economist from the Institute for the Development of Economics and Finance (INDEF), Aviliani, shared a similar view, adding that the government had to improve the authority of the SNI to step up efforts to curb illegally imported products as current standards were not effective to secure the domestic market import saturation.

“Other countries also take measures to protect their markets from imports. Our SNI is still too weak,” she said.

She warned about the potential surge in imports from China, which would try to shift their exports from countries under crisis to other countries, including Indonesia.

According to Aviliani, over the longer horizon, the government will likely allocate a larger portion of overall government spending on infrastructure projects in anticipation of potentially higher unemployment rates.
“Such projects can absorb workers who may have lost their jobs in the manufacturing sector,” she said.