TEXTILE & GARMENT

MARKET TREND ANALYSIS

“Impact of the Global Financial Crisis on Indonesian & Cambodia;

Chance & Opportunity in 2009”

Presented by Redma Gita Wirawasta

Editor in Chief/executive Director of Indotextiles
Secretary General Textile Technology Institute Alumni Union

www.indotextiles.com
Published by :
CV. Gaindo Pratama
Jl. Bambu Wulung no.54
Bambu Apus Jakarta 13890
Ph. +62 21 70932722
Fax. +62 21 70932744
e-mail : secretary@indotextiles.com

Profile of Indonesian Textile & Clothing

Distribution of Textile & Clothing
Company By Region 2007

…… We have integrated structure East Java Bali

Sumatera
of industry, from up stream to Yogyakarta
6% 3% 2%
down stream …… 1% Jakarta
17%
Central
Java
14%

Fiber Making West Java

57%

Spinning

Weaving/Knitting

Dyeing/Printing &
Finishing

Garment

1
 Profile of Indonesian Textile & Clothing

TEXTILE & TEXTILE PRODUCT MEN POWER

Textile & Clothing on
MEN POWER 2003 2004 2005 2006 2007
Macro Economy DIRECT (LARGE SCALE
1,182,871 1,184,079 1,176,183 1,194, 326 1,200,842
INDUSTRY)
DIRECT (SMALL
584,786 668,372 665,337 665,337 276,000
INDUSTRY)
INDIRECT *) 3,535,314 3,704,902 3,683,040 3,679,738 2,952,000

TOTAL 5,302,971 5,557,353 5,524,560 5,519,607 4,428,000

TEXTILE INDUSTRY'S SHARE TO

INDONESIA MANPOWER
97.58 mill ………Absorbing the largest
workers in the industrial and
Retail, Other Industry & manufacturing sector ……………
Restaurant & 18% Manufacture
Hotel 12%
20%

15%
Textile & Clothing
Mining (1,841,520)
1%
Contruction Agriculture
5% 44%
Source : BPS, Compiled by API

Profile of Indonesian Textile & Clothing

Textile & Clothing on Macro Economy Indonesian Textile & Clothing Trade Balance
(US$ Billion)
10.03

Textile & Clothing 12.00

9.47

7.98
8.6

7.93

10.00
7.64

GDP Contribution 2007

7.03

6.99
6.88

5.92

8.00
5.36
5.06

Net Exports : US$ 7.98 bn 6.00

Dom. Sales : US$ 1.97 bn
2.05

4.00
1.82

1.72
1.67

1.61

1.54

Investment : US$ 0.33 bn 2.00

Total : US$ 10.28 bn 0.00
2002 2003 2004 2005 2006 2007
GDP 2007 : US$ 423.69 bn
Total Export Total Import Balance

Textile Contribution Indonesian Surplus Balance/

on GDP 2007 Netto Share 2006
Other (Total US$ 39.61 Bill)
98% Textiles &
Textile & Clothing Oil & Gas
Clothing 20.02% 4.72% Elektronic
2% Rubber 12.07%
6.49%

..... The Second biggest net Shoes &

Leather Other
exporter, which is 4.29%
Mining 26.91%
25.50%
influencing to GDP……
Source : BPS, BI , Ministry of Industry compiled by API

2
 INDONESIA T&G PERFORMANCE Q3 2008

Indonesia Textile Sales (US$ billion) Textile Sales

The Q3 of 2008 (yoy) :
12
10
8
•Export increased by 7% (US$ 7.98 billion)
6 (Fiber 45.8 %, yarn and fabric 2.4 %, ready made wear 7.2 %)
4 •Dom. Sales (Garment) dropped by 20 %
2
0 •Total Sales Decreased by 2.2 %
2007 2007(jan-sep) 2008(jan-sep) •Import rose by 23.5 % (US$ 4.14 billion)
Export Dom .Sales Im port Surplus (Fiber 28.4 %, Yarn and Fabric 21.7 %, Ready-made wear 17.4 %)
•Surplus decreased by 9.1 %

Indonesia Textile Sales Distribution 2007

(Total US$ 11.57 billion) Indonesia Textile Sales Distribution Q3
of 2008
Domestic (Total US$ 9 billion)
13% USA Domestic
37% 15% US
Other 38%
26%
Other
ASEAN Japan EU 25%
6% 4% 14% ASEAN EU
Japan
1% 17%
4%

Source: BPS, Otexa, Eurostat, Japan Custom processed Indotextiles

INDONESIA T&G PERFORMANCE Q3 2008

Indonesia Textile & Clothing Export

to US (US$ billion) Indonesia Textile & Clothing Export
to EU (US$ billion)
4.21
3.93
2.23
3.08 3.26
1.88
2.62 1.59 1.7 1.65
2.38 1.49

2003 2004 2005 2006 2007 Jan- 2003 2004 2005 2006 2007 2008(jan-
Sep2008 sep)*

Indonesia Textile & Clothing Export to Japan Indonesia Textile & Clothing Domestic Sales
(US$ million) (US$ billion)
480 494 503
474 3.49
426
2.95
362
2.43
1.97
1.61
1.25

2003 2004 2005 2006 2007 Jan-Sep 2003 2004 2005 2006 2007 2008 (jan-
2008 sep)

Source : BPS, Major Shipper, Eurotex, Japan Statistic, Ministry of Trade, API Compiled

3
 INDONESIA T&G PERFORMANCE Q3 2008

% of Value Growth of Indonesia Textile The world economic-business

Sales By Region environment changes world
supply-demand in textile industry

100 Indonesia textile export to the US

50
and Japan decreased since the
import from the two countries
0 dropped as well.
2003 2004 2005 2006 2007 2008*
-50
The domestic sales decreased
-100 due to the people purchasing
USA EU Japan ASEAN Other Domestic power dropped.

2003 2004 2005 2006 2007 2008*

The economic-business
environment today drives
AS 20 10,2 17,5 26,6 7,8 -0.20
Indonesia textile products to
UE 1,8 40,7 -23,9 10,7 -12,3 15
have market penetration in EU,
Japan 24 12,6 -1,2 4,2 4 -4.4 ASEAN, and non-traditional
ASEAN 7,4 3,4 11,6 -1,5 6,6 17 market (Middle East).
Other -16,2 -93,6 136 -6,1 17,5 9
Domestic 3 11,6 -53 50,5 -38,4 -20
2008* est Jan-Sep
Source: BPS, Otexa, Eurostat, Japan Custom compiled by Indotextiles

CAMBODIA T&G PERFORMANCE Q3 2008

Cambodia Textile & Clothing
Cambodia Workforce Share 2007 Export to US (US$ billion)
(7 million people)

Other 2.44
Services Garment
Industry 2.15
16% 5% 1.84
4% 1.73
1.44
1.25

Agricultur 2003 2004 2005 2006 2007 Jan-

e Sep2008
75%

• Textile & garment are

Cambodia Garment Export Cambodia Garment Export Distribution contribute 70% of total
Q3 2008
Distribution 2007 export.
(Total US$ 2.12 billion)
(Total US$ 2.54 billion) • 97% of total textile & garment
Other Other
4% 13% are garment product.
• 96% export orientation to the
US market.
• 18% export growth (5 year
US US
96% 87% average) to the US market.

Source: CIA World Fact book, Otexa compiled by Indotextiles

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 THE US TEXTILE MARKET Q3 2008
US Textile Import Q3 2008 (US$ million)

Source: Otexa

The US textile import decreased as impact on sluggishness of the country. It

made textile export from Mexico, China, Pakistan & other to the country
declined as well.

THE US TEXTILE MARKET Q3 2008

% of Value Growth of Main Supplier to The
US China start to lose their grew, Vietnam
enjoyed the highest growth of textile
50
export by focusing on the made-made
40 wear (knit shirt, knit blouse, w/g slacks).
The home textiles also grew (pillowcases
30
and cotton sheets), as well as footwear.
20

10
Indonesia export grew by 1.6%, by value
0
2004 2005 2006 2007
also grew by 1.16%. The export relied on
-10 baby garment, w/g knit blouse, knit shirt,
China India Pakistan Indonesia
Vietnam Cambodia Bangladesh World
and wool.

US Market Share Import Q3 2008

Cambodia export grew by 4.5% but by
(US$ 70.79 billion)
value it decreasing 0.04%. The export
China relied on w/g cotton coat, knit shirt, knit
Other
34%
41% blouse, trouser, slack &
nightwear/pajamas.
Indonesia Mexico
5% 5%
Cambodia Vietnam India
3% 6% 6%

Source: Otexa processed by Indotextiles

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 THE US TEXTILE MARKET TREND 2009/2010

The US economic sluggishness is expected to happen in the end of 2008, in

which the US government appears to increase country’s economy by driving
real sector and increase export. It is expected to strengthen US$ by market
mechanism. The US textile import growth in 2009/2010 will depend on it.

At any rate, for some categories such as non-woven, satin, and other
specific fabrics will get positive growth in import. Meanwhile, the baby
garment will dominate ready-made wear. In addition to baby garment, w/g
dress, knit shirt, clothes made of wool, and home textile like bed sheet and
pillowcases will also dominate.

Competition in the US market for the next two years is still dominated by
ready-made wear from Vietnam. Vietnam is now becoming the fully member
of WTO. The new garment producing country (Cambodia) is also getting
positive growth trend.

Prediction On US Market 2009

Corelation on Inflasi Import Growth
on US Market
Inflation increase,
10 import decrease

0
2002 2003 2004 2005 2006 2007 2008 2009 If the US inflation reach up to 5%,
-5 the import expected drop 10%.

-10

Inflation Import Growth

2002 2003 2004 2005 2006 2007 2008*

Inflation % 1.59 2.27 2.68 3.39 3.24 2.85 4.55
Import 2.7 7.3 7.6 7.1 4.5 3.3 -3.6
Growth %

* Until Augusts 2008

Source : Inflation data, OTEXA

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 JAPAN TEXTILE MARKET 2008; 2009/2010 TREND
Japan Textile Import Q2 2008

Jan Jun 2007 Jan Jun 2008 Growth Japan also gets
Jan Jun 2007/2008 economic
000 Ton Bn. Yen 000 Ton Bn. Yen Volume Value sluggishness which in
Total Textile 675.15 384.05 686.65 370.95 1.70% -3.42% turn make textile
Import
Garment 474.02 1227.09 453.43 1118.87 -4.34% -8.82% import decreased by
Total 1149.10 1611.15 1140.00 1489.84 -0.78% -7.57% 7.57% (import from
Import Textile 57.08 22.97 58.69 22.35 2.83% -2.70% Indonesia decreased
From
Garment 3.60 7.62 3.73 6.91 3.69% -9.32%
by 4.35%).
Indonesia
Total 60.68 30.59 62.42 29.26 2.28% -4.35%

Indonesian TPT Export to Japan For Indonesia, Japan is the quiet market and not too
(US$ juta) fluctuate. Japan export is still dominated by fabric
and yarn, functional and technical garment (medical
480 474 494 503
426 garment, etc.)
344 362

The Japan textile market would be much influenced

by FTA ASEAN-Japan, including FTA Indonesia-Japan
(IJ-EPA. It removes all duties of textile products and it
2002 2003 2004 2005 2006 2007 Jan-
Sep is predicted to take Chinese textile share.
2008

Source: Japan Custom compiled by API

DOMESTIC TEXTILE MARKET 2008: 2009/2010 TREND

Indonesia Domestic Sales & Export

Comparison
Decrease of the people purchasing
12
power due to the inflation impact on
10 the decrease of consumption in
8 textile products by 20%.
6

4 This year is expected the people

2
purchasing power has yet to
0
recover. BI predicted that inflation
2007 2007(jan-sep) 2008(jan-sep) will reach two digits this year.
Export Dom. Sales
Domestic market still has opportunity to absorb textile
Market Share on Domestik products especially for uniform and batik, and the T-short
Market 2007 labeled by distro.
(Total: 1.22 million ton)
Ilegal
Import Import
In the end of 2008 and the beginning of 2009, the market will
10% 26% focus on producing party’s attributes (T-shirt, flag, etc.)
Local
Suply
64% Despite it still becomes threat, mainly ready-made wear,
Chinese products begin lose of competitiveness.
2008* Jan-Sep Estimation
Source: BPS, BI processed by Indotextiles

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 UE TEXTILE MARKET 2008; 2009/2010 TREND
Indonesia T&G export to EU
(US$ Billion)
Strengthening of Euro against the
12.00
US$ drives the countries in the
10.00
region import from the countries
8.00
whose currency near the US$. It
6.00
will go on and it depends on the
4.00
2.00
US economic condition.
0.00
2003 2004 2005 2006 2007 2008(jan-
sep)*
Export to EU Total Export

The EU market tends to fashion, in which gets faster and

Market Share of UE Textile faster circulation of fashion (6-8-12 seasons annually).
Import 2007 (EUR 162.95 bill)
Indonesia Other
Tunisia The EU market tends to the environmentally products
India 1% 2% 19%
4%
and naturalistic.
Turkey
8%
Internal Home textile products will get high growth trend of
EU import following on the trend of home textile companies
China 49%
in EU to have relocation.
17%

2008* Jan-sep Estimation

Source: BPS, BI processed by Indotextiles

ASEAN TEXTILE MARKET 2008: 2009/2010 TREND

Indonesia Textile Export to ASEAN

(US$ billion)

12
10 ASEAN becomes new power as the
8 world’s basis of textile production by
6
4
emerging countries such as Vietnam
2 and Cambodia. The two countries
0 are much considered in the world
2003 2004 2005 2006 2007 2008 textile competition.
(Jan-
2008* Jan-sep Estimation
Source: BPS, BI processed by Indotextiles
Sep)

Indonesia export to ASEAN countries keeps on growth. ASEAN is the prospective market
which supported by 500 million people. By country, the export-oriented countries in ASEAN
will drive integration/business relations between upstream and downstream sector among
the ASEAN countries.

ASEAN-Japan Economic Cooperation will get positive impact on the ASEAN textile
products to the Japan market. ASEAN countries will compete with Chinese products in the
Japan market.

8
 NON-TRADITIONAL TEXTILE MARKET 2008: 2009/2010 TREND

Indonesia Textile Export to Non-

Traditional Market (US$ billion)

12
10
8
6
4
2
0
2003 2004 2005 2006 2007 2008(jan-
sep)*
Export to Non-traditional Market Total Export
2008* Jan-Sep Estimation
Source: BPS, BI processed by Indotextiles

Textile consumption in the non-traditional market mainly in Middle East is expected to

increase, following on the height of crude oil price that will increase people purchasing
power.

Other non-traditional markets such as Africa and Latin America will not much change. The
regions are expected to get negative growth following on the increase of crude oil price. The
oil price increase will impact on the developing countries and decrease people purchasing
power.

TEXTILE ECONOMIC-BUSINESS ENVIRONMENT 2009

This year, textile business environment is influenced by:

1. The world textile consumption will get -5% growth of the 3% average annually
- The US financial crisis made height of inflation (4.5%) and declined consumer spending, the import
is expected to drop by 5-7% (in Q3 2008 the import decreased by 2.9%).
- The crisis brought negative impact to Japan, the import is predicted to decline by 5% (in 2008 the
import decreased by 3.4%)
- The EU import growth is still stagnant (one country grows and another declines)
- Consumption in the Middle East region is growing positively

2. China begin loosing competitiveness, India remains exist, and Indonesia is stagnant
- Releasing currency to the market made RMB strengthens against the foreign currencies.
- The increase of production cost especially for labor cost
- Increase of percentage of export rebate has yet to be agreed by government
- Strength of the world business network made textile industry (yarn, fabric, and ready-made wear) in
India does not feel impact of the financial crisis
- Investment and performance in garment industry in Indonesia are growing, while spinning and
weaving sector are under pressure

• Competitiveness of Vietnam, Bangladesh, and Cambodia are sharply increasing, mainly

in the garment sector
- Relocation of garment industry from South Korea and Taiwan in the South East Asia is empowering
position of Vietnam and Cambodia as the garment producing countries. (Indonesia includes as the
main investment destination country)
Supply-demand structure changes (the market condensed, coming new
competitor), market structure will quickly change

9
 Globalization era requires us to be able to fast and accurate
adapt to a change in every market region……...

…………The company’s ability to access faster the change

of market information as well as penetrate the different
market accurately will be determiner factor to win
competition.

…..T H A N K Y O U…..

10