Indonesia: Textile, footwear firms gear up to weather recession

Despite a looming economic recession in the United States and some European countries, Indonesia's textiles and footwear industries are upbeat on cushioning adverse impacts by reducing production costs and diversifying export markets.

While exports will remain robust this year, textile and footwear producers will start gauging the level of next year's demand from the United States and Europe in the fourth quarter of this year, when orders are normally made ahead.

Chairman of Indonesia Footwear Producer Association (Aprisindo) Eddy Widjanarko told The Jakarta Post Sunday the association would remain on course to achieve a 10 percent export growth target this year, to reach US$1.76 billion.

"Orders until December are relatively secure. So far no companies have canceled any orders."

"We may start feeling the impact of the economic meltdown in the next season. We will find out how big that impact might be in November when buyers start lodging orders," he said.

The United States and Europe are Indonesia's largest footwear export markets, accounting together for 60 percent of total export value.

Eddy, however, believed that Indonesia's footwear demand would still be strong despite the recession because rising production costs in China have encouraged Western footwear producers to move orders to Indonesia.

Another encouraging factor, he added, was that the European Union was still imposing a limitation on footwear imports from China and Vietnam following allegations of dumping, providing leeway for more Indonesian-made shoes into EU markets.

Despite the United States House of Representatives approval for the $700 billion bailout, the U.S. is on the verge of a serious recession with preliminary indications still showing continuing unemployment levels and a drop in labor payouts.

Ireland, one of the Eurozone economic tigers, is slipping into recession following two quarters of negative economic growth, while economic indicators in France, the second largest Eurozone economy, also point to a slowdown.

Meanwhile, the Association of Indonesia Textile Producers (API) is optimistic that it can cope with any falls in traditional markets, saying exports would still grow by at least 7 percent next year, mostly following market diversification.

Last year, textile export value reached $10.06 billion, with export growth estimated at 7 percent this year.

The U.S. market accounts for 36 percent of the total export market, followed by Europe with 15 percent.

The association's secretary general Ernovian Ismy believed that despite the crumbling U.S. economy, demand would still be high there, especially during this winter season.

"They (Americans) have the habit of buying new clothes during winter, because they don't like to wear the same clothes they bought last year," Ernovian said, adding that orders were usually lodged in every quarter of the year.

He also said the association's strategy to diversify its export markets mainly to Asia, the Middle East and Latin America since the first quarter of this year would be able to offset the decline in U.S. and European markets.

Indonesia is the global garment market's 10th biggest provider and the U.S. market's third biggest.