Indonesia Garment Manufacturing Market Report 2023-2032: Projected to Reach $18.2 Billion by 2032 at a CAGR of 8.6%
Research and Markets
Tue, Jan 30, 2024, 12:06 AM8 min read
Indonesian Garment Manufacturing Industry Market
Dublin, Jan. 29, 2024 (GLOBE NEWSWIRE) — The “Indonesia Garment Manufacturing Industry Research Report, 2023-2032” report has been added to ResearchAndMarkets.com’s offering.
Indonesia is the largest economy in Southeast Asia, and Indonesia has an abundant labor force with low labor costs. By the end of 2022, the population of Indonesia will be about 275 million, which is the fourth largest population in the world, with about 70% of the population aged 15-64, and the working population will be about 140 million, which is a plentiful labor force and consumer market. According to the analysis, the young population structure will bring 10 to 15 years of growth to the Indonesian consumer market.
Indonesia is one of the world’s top ten textile producers, and the textile and textile products industry is one of the most important industries in the Indonesian economy, providing employment for more than 3.7 million Indonesians. The majority of Indonesia’s total textile and clothing production is used to supply international demand, of which 70% is exported, with the United States of America being the largest exporter of Indonesian clothing and textiles.
As apparel companies continue to shift production out of China, Indonesia has become an attractive alternative. China’s position as a global cotton importer is declining, and most cotton exports are being shifted to competing countries, including Indonesia. The USDA forecasts that China’s cotton imports will increase by only 3.5 million bales over the 2021-2030 period, compared to an estimated 8.1 million bales for the major competing apparel countries Indonesia, Vietnam, Pakistan, Bangladesh, and Turkey combined. By 2030, China is expected to account for 24% of total global imports, while competing countries combined are expected to account for 47%.
Indonesia’s garment industry is concentrated in West Java, Central Java, East Java and Banten, which together account for more than 85 percent of all garment, textile and footwear employment. The garment industry is labor-intensive and easy to relocate, and employers have been relocating factories to areas with lower minimum wages.
From 2018 to 2022, according to the analysis, Indonesia’s textile and apparel export value shows a trend of change firstly decreasing and then increasing, with a CAGR of 4.16% from 2018 to 2022.In 2020, affected by the COVID-19 epidemic, Indonesia’s apparel manufacturing industry contracted, and Indonesia’s textile and apparel export value was 5.857 billion U.S. dollars, which was a year-on-year decline of 17.19%.In 2021 The Indonesian government relaxed the control measures, and the export of Indonesia’s textile and apparel industry recovered rapidly in 2021 and 2022, and the export value of Indonesia’s textile and apparel in 2021 and 2022 was US$6.909 billion and US$7.992 billion, respectively, an increase of 17.98% and 15.6% year-on-year, respectively.
The textile industry is now a strategic target industry for Indonesia. The prospects of Indonesia’s textile industry offer golden opportunities for investors, especially in the supply of sophisticated machinery and production equipment and capacity building. Its business environment has become more lucrative due to the increased purchasing power of the population and the proliferation of e-commerce platforms. This aggressive consumer behavior following lifestyle trends will fuel high demand for functional textiles for apparel, automotive, fitness, sports and military applications. The recently established Industrial Services and Solutions Centre (ISSC) facility at the Centre for Standardization and Textile Industry Services (BBSPJIT) is in its prime. It provides information services, testing, calibration, product and quality system certification, technical training and consultancy, develops standards for the textile industry and provides inclusive professional assistance to the textile industry. This integrated infrastructure will not only help meet domestic demand, but also increase the competitiveness of the textile industry in the global market, especially in the EU – one of Indonesia’s major export destinations. Indonesia is in the process of negotiating with the EU for an Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA), and Indonesia is looking towards Vietnam and Bangladesh.
At the same time, the Indonesian Government was constantly striving to build a productive, connected and sustainable textile ecosystem. By 2030, the country is expected to become one of the top five global textile manufacturers and one of the world’s top 10 economies in the Industry 4.0 era.
In the coming years, Indonesia’s textile and apparel exports will continue to grow due to its low-cost advantage. The analyst expects the export value of Indonesia’s textiles and garments to reach US$ 18.2 billion in 2032, representing a compound annual growth rate (CAGR) of about 8.6% from 2023-2032.
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https://www.innovationintextiles.com/prospects-for-textiles-and-clothing-in-indonesia-2024
Textiles Intelligence
Prospects for textiles and clothing in Indonesia, 2024
The textile and clothing industry in Indonesia fulfils a vital role in the country’s economy.
© Dreamstime
18th September 2024
Innovation in Textiles
United Kingdom
Report summary
The textile and clothing industry in Indonesia fulfils a vital role in the country’s economy. It is Indonesia’s largest source of manufacturing employment, and in 2023 textile and clothing exports from Indonesia represented 4.5% of the country’s overall exports during the year.
The industry is involved in almost every sector of the textile supply chain, including man-made fibre production, yarn production, weaving, knitting, dyeing, printing, finishing, clothing production, and the manufacture of other finished textile products. Indonesia has a very large population which constitutes a huge and growing domestic market and provides a firm foundation for the textile and clothing industry in Indonesia.
Furthermore, the domestic market has been expanding significantly in recent years as prosperity has risen and wealth has spread, and it seems set for further growth. However, these developments have made the domestic market an attractive target for foreign suppliers. Imports are rising strongly and the domestic market has been well supplied by cheap imports from China.
Also, illegal imports appear to be a significant and growing problem. Looking ahead, there are ambitious plans for further expansion of the textile and clothing industry in Indonesia and, in order to achieve such expansion, the government has increased its support for the industry through a number of initiatives.
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Indonesia’s Textile and Garment Industry: Opportunities for Foreign Investors
- Indonesia’s textile and garment industry presents new growth opportunities for foreign investors.
- The country’s textile and garment exports were valued at US$13.8 billion in 2019, and the government is aiming to propel this industry into the top five largest in the world.
- To achieve this, the sector needs investments in new technology and machinery as well as human capital development.
- Foreign investors that can facilitate this transformation can take advantage in establishing new export markets and increasing the competitiveness of Indonesian textile products.
Indonesia’s textile and garment industry enjoyed positive growth throughout 2019 with exports valued at US$13.8 billion, an increase from US$10 billion in 2018 and making the country one of the largest textile producers in the world.
Despite this upward trajectory, the industry has been severely impacted by the US-China trade war, and now, the COVID-19 outbreak. Vietnam, although also affected by the trade war, still recorded some US$35 billion in textile exports in 2019.
Currently, 30 percent of Indonesia’s total production is to meet domestic demand with the remainder for exports to mainly the US (36 percent), Middle East (23 percent), EU (13 percent), and China (5 percent). These are dominated by large manufacturers producing for global apparel brands. Before the onset of the virus, the Indonesian Textile Association (API) stated that the country’s textile and garment industry is expected to grow at a compound annual growth rate (CAGR) of 5 percent.
The government, through its Industry 4.0 Masterplan, aims to propel the country into the top five largest textile producers in the world by 2030. This presents unique opportunities for foreign investors to enter and assist in this revitalization program, in particular, supply expertise on sophisticated production techniques.
Constraints remain
Internal constraints still plague Indonesia’s textile industry and have hindered its export potential. Electricity and gas prices are high compared to other textile producing countries, which has reduced Indonesia’s competitivity in the international market.
Labor costs have also increased annually; the minimum wage in Indonesia has been increased by 8.5 percent for 2020. The country’s minimum wage is also fixed based on the sector. ‘Leading sectors or industries’ in a province, like textiles and garment manufacturing, can determine their own minimum wage rate, also known as UMSP. The UMSP must be higher than the provincial minimum wage (usually by 5 percent and above).
Another issue has been ageing machinery, which results in overall lower productivity and efficiency for the country. This undermines one of the sector’s key strengths – the presence of both an upstream and downstream industry – although only the largest players can afford to invest in new plants and machinery to complement these operations.
Furthermore, increasing regional integration has resulted in an influx of cheaper textile products into Indonesia (legal and illegally), especially from China, which has placed pressure on smaller domestic manufacturers. For many smaller, local companies, turning to the production of ‘Batik’ has been a way to distinguish themselves, but this is a very niche market in the global textile industry.
Batik is a centuries-old technique of using wax and dye to decorate cloth and garments developed in Indonesia. The artform has been designated as an Indonesian cultural contribution to the world by UNESCO, with many manufacturers still utilizing hand-drawn designs. An increasing number of manufacturers are moving away from the manual technique and using modern machinery to produce printed Batik.
External constraints include the depreciating Rupiah, which has increased production costs. This is because raw materials, such as cotton, are bought with US dollars from the US, Brazil, and Australia – amounting between US$300 to US$600 million per year – and impacting the profitability of companies that cater to the domestic market. Larger companies with the capacity to export their products are benefiting from the stronger dollar as it increases their revenues.
Opportunities for foreign investors and industry diversification
Despite the aforementioned challenges, the overhaul of this lucrative industry requires local companies to access much-needed funding.
Foreign investors with the expertise to facilitate more value-added production techniques are in high demand. Further, as international competition becomes fiercer, textile companies that lack the capital to compete could be takeover targets through partnerships, joint ventures, and private equity investment.
The Indonesian government is looking to enhance its support for the textile industry. The current administration has improved the country’s logistics by building new highways and ports. It is also curbing the import of illegal textiles and tightening import rules for textiles and textile products.
More vocational institutions catering to the sector are being developed in cooperation with local companies, aiming to produce skilled human capital who can use the latest technology in production, such as 3D printing.
Industry players must also diversify their export market – considering that its biggest market, the US, could impose tariffs on a variety of Indonesian products, including textiles at any time.
New potential international markets could include Australia – both countries ratified the IA-CEPA trade agreement in February 2020 – as well as New Zealand, South Korea, and Japan.
Additionally, Indonesia’s Muslim fashionwear is finding an increasing market in the Middle East and North Africa as the region now represents more than half of the country’s overseas missions and trade negotiations.
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Indonesia’s Garment and Textile Industry: Facing Challenges, but Still Growing
Sun, 25 Jun 2023 07:32 | Industrial Transformation | Editorial INTI
INTI- Indonesia is one of the world’s leading exporters of garments and textiles. The industry is a major driver of economic growth in Indonesia, and it employs millions of people.
The Indonesian garment and textile industry is competitive for a number of reasons. First, Indonesia has a large and growing workforce. The country’s population is young and growing, and the unemployment rate is relatively low. This means that there is a large pool of potential workers available for the garment and textile industry.
Second, Indonesia has a favorable investment climate. The government has made significant investments in the garment and textile industry, and it has also implemented policies to attract foreign investment. This has helped to make Indonesia an attractive destination for garment and textile manufacturers.
Third, Indonesia has access to raw materials. The country is a major producer of cotton, and it also has access to other raw materials such as wool, silk, and synthetic fibers. This gives the industry a competitive edge in terms of sourcing raw materials.
Finally, Indonesia has a strong domestic market for apparel. The country’s population is growing, and the disposable income of Indonesians is increasing. This means that there is a growing demand for apparel in Indonesia.
The Indonesian garment and textile industry has shown resilience in the face of challenges such as the COVID-19 pandemic. In 2020, the industry was severely affected by the pandemic, as global demand for apparel declined. However, the industry has since rebounded, and it is now expected to grow at a healthy pace in the coming years.
Some of the factors that have contributed to the industry’s resilience include:
- The government’s support: The Indonesian government has provided financial support to the industry, and it has also implemented policies to help the industry recover from the pandemic.
- The industry’s agility: The garment and textile industry is relatively agile, and it has been able to adapt to the challenges posed by the pandemic. For example, many companies have shifted their focus to the domestic market, and they have also invested in new technologies to improve their operations.
- The industry’s workforce: The Indonesian garment and textile industry has a skilled workforce, and this has helped the industry to weather the storm.
The future outlook for Indonesia’s garment and textile industry is positive. The industry is expected to grow at a healthy pace in the coming years, driven by factors such as rising incomes in Indonesia and growing demand for apparel in the global market.
In order to maintain its competitive edge, the industry will need to continue to invest in new technologies and to improve its workforce skills. The industry will also need to focus on sustainability, as this is becoming an increasingly important issue for consumers.
Here are some additional factors that could contribute to the future growth of the Indonesian garment and textile industry:
- The rise of e-commerce: The growth of e-commerce is creating new opportunities for the garment and textile industry. E-commerce platforms allow manufacturers to reach a wider audience and to sell their products directly to consumers.
- The growth of the middle class: The growth of the middle class in Indonesia is creating new demand for apparel. As more Indonesians become middle class, they will have more disposable income to spend on apparel.
- The increasing focus on sustainability: Consumers are increasingly concerned about the sustainability of the products they buy. The garment and textile industry can capitalize on this trend by focusing on sustainable practices.
Conclusion
Indonesia’s garment and textile industry is a major driver of economic growth in the country. The industry is competitive and resilient, and it is well-positioned for future growth. With continued investment and innovation, the industry is poised to continue to grow in the years to come.
However, there are some challenges that the industry will need to overcome in order to achieve its full potential. These challenges include:
- Competition from other countries: Indonesia faces competition from other countries that are also major exporters of garments and textiles. These countries include China, Bangladesh, and Vietnam.
- The rise of automation: The garment and textile industry is increasingly being automated. This means that there is a risk of job losses in the industry.
- The need for innovation: The garment and textile industry needs to continue to innovate in order to remain competitive. This means investing in new technologies and developing new products.
Despite these challenges, the future of Indonesia’s garment and textile industry is bright. The industry has a number of competitive advantages, and it is well-positioned to grow in the years to come. With continued investment and innovation, the industry can achieve its full potential and create jobs and economic growth for Indonesia. ***.Hans
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Despite significant challenges, Indonesia’s textile sector remains prospective
24 Jul 2024
Insights
Textiles
Indonesia’s textile industry faces significant hurdles due to global economic conditions. Factors such as high interest rates in the US and economic slowdowns in key markets like the US and Europe are impacting investment and demand. The Indonesian Textile Association (API) has noted a decrease in production capacity utilization, which fell below 50%, the lowest since 2020. This is compounded by increasing costs of raw materials and energy, making it difficult for domestic manufacturers to remain competitive.
This has led to a significant number of layoffs, with nearly 14,000 job losses due to declining orders since the beginning of 2024, with some companies even experiencing a complete halt. To mitigate the impact, the government is even considering implementing a 200% tariff on imported textiles from countries like China, Vietnam, and Bangladesh to protect its domestic industry from dumping practices. However, as of the publication of this article, this policy has yet to be put into effect, if at all.
Despite these challenges, the outlook of Indonesia’s textile industry remains prospective, as indicated by the sector’s stable export and investment numbers.
Indonesia’s export of apparel and garments, Jan-May 2022-2024 (in Mn US$)
| Year/Month | Jan | Feb | Mar | Apr | May |
| 2022 | 1,335.35 | 1,188.45 | 1,276.94 | 1,308.62 | 971.41 |
| 2023 | 975.29 | 956.48 | 1,028.98 | 735.71 | 1,044.30 |
| 2024 | 1004.63 | 987.34 | 971.91 | 754.1 | 970.57 |
Source: Ministry of Industry
Jan-Mar investment in the textile sector
| Investment | 2022 | 2023 | 2024 |
| Domestic (in IDR Mn) | 587,929.3 | 2,947,037.5 | 1,713,618.8 |
| Foreign (in US Thousand) | 126,064.5 | 114,168.3 | 194,287.3 |
Source: Ministry of Invesment/BKPM
This is because Indonesia’s large population and growing middle class remains a winning formula for business players. The government’s ongoing efforts to create a favorable business environment, coupled with the sector’s potential for modernization and innovation, provide a hopeful outlook for investors and industry stakeholders alike. Under these conditions, India-based market research firm Mordor Intelligence projected a compound annual growth rate (CAGR) of 5.54% from 2024 to 2029, with the market size expected to reach USD 18.10 billion by 2029.
There are numerous opportunities for business players in the Indonesian textile industry. The government’s support through favorable policies and incentives aims to attract investment in new technology and machinery, crucial for modernizing the sector. These policies include tax breaks, duty exemptions for importing machinery, and support for research and development initiatives.
Sustainability is another key area of opportunity. Consumers globally are becoming more conscious of environmental and social issues, driving demand for responsibly produced textiles. Many Indonesian companies are adopting sustainable practices, such as using eco-friendly materials and energy-efficient production processes.
The technical textiles segment, which includes specialized products like medical and industrial fabrics, offers promising avenues for growth and innovation. Investment in this segment can help diversify the industry and reduce reliance on traditional textile products
To capitalize on these opportunities, business players in the Indonesian textile industry should focus on several strategic areas. These include upgrading machinery and adopting advanced manufacturing technologies in order to stay competitive in the global market, as well by exploring new markets and diversifying product offerings, especially in the technical textiles segment.
The Indonesian textile industry presents a mix of challenges and opportunities. Nevertheless, the sector’s resilience, combined with favorable economic and demographic trends, positions it well for continued expansion in the coming years.
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