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Indonesian textile industry sees $4.63Bn surge in investments, despite slow exports

  

The textile and textile products (TPT) industry in Indonesia witnessed a significant surge in investment realization during the first quarter of 2023, reaching $4.63 billion, an 89.41% increase compared to the same period last year.

Despite sluggish export orders, the rise in investment, particularly in domestic investment (PMDN), can be attributed to the growing demand for textile products within the country. Local investors, who have a better understanding of the domestic market, responded quickly to the increasing demand, resulting in the surge in investments. This trend was further supported by the ordering process of TPT equipment and machines that began last year, with the goods arriving as planned, even though export orders remained slow.

While export-oriented industries usually rely on foreign investment, the decline in export orders did not have a significant impact on the local TPT industry. Many factories took advantage of the production slowdown to conduct maintenance and replace machines and spare parts. As a result, the investments in the first quarter were primarily focused on purchasing machinery and spare parts rather than constructing new facilities.

The Investment Coordinating Board (BKPM) reported a remarkable 401.25% increase in PMDN investment, amounting to $2.95 billion in the first quarter of 2023. However, foreign direct investment (PMA) declined by 9.4% to $114.2 million.

Most of the TPT investments realized in the first quarter came from the intermediate industry sector, particularly the knitting, woven, and finishing fabrics sub-sector. These investments primarily focused on procuring weaving machines, spinning machines, and spare parts. The timing of these investments coincided with the period before the general elections, during which the demand for TPT products typically increases for campaign support equipment such as t-shirts and banners.

To address the challenges posed by global uncertainty and declining exports, the Ministry of Industry implemented a machine restructuring program in the TPT industry. This program aims to enhance competitiveness by promoting the use of modern, efficient, and environmentally friendly equipment. By upgrading machinery, the industry can increase productivity, efficiency, and product quality. In 2022, the TPT industry demonstrated positive performance, with an export value of $13.83 billion and employing approximately 3.65 million people. It contributed 1.03% to the national GDP, experiencing a 9.34% annual growth rate.

The machine/equipment restructuring program will prioritize the fabric perfecting and fabric printing industries, targeting the participation of 13 companies. The allocated budget for 2023 is $4.7 million, which will provide a discounted price reimbursement of 10% for imported machinery/equipment and 25% for domestically produced ones.

 
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