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Indonesia'S Cotton Export Competitiveness Declined Because Of Rising Costs, Especially In Vietnam And Bangladesh.

2020/1/2 14:07:00 0

CostRisingCotton YarnExportCompetitivenessCompetition

Cotton consumption in 2018/19 decreased from 3 million 500 thousand bales to 3 million 100 thousand bales. Despite the fierce competition and low price imports at the beginning of the year, some domestic textile factories closed, but the expansion of factories and the recent restrictions on the import of gauze made the 2019/20 cotton consumption steady at 3 million 100 thousand bales.

Domestic cotton mills and the entire textile industry are facing many severe challenges. The new deal allows factories in the bonded area to import large quantities of low priced textiles into the domestic market, directly compete with domestic products, and increase the stock of yarn and cloth in the domestic spinning mills. In 2019 1-9, Indonesia's cotton yarn imports increased by 10% compared with the same period last year. The main sources of imports were India (41%), China (24%) and Vietnam (14%).

According to Indonesia's Ministry of industry, the number of Indonesian manufacturing industry in 2018 was 17 million, of which 9.8% of the textile industry. Although cotton accounts for half of the cost of cotton yarn production, labor cost is also a key factor in product competitiveness. At the same time, the impact of environmental protection policy can not be ignored. The policy requires that new water treatment facilities will undoubtedly increase production costs. Some small factories can not afford to shut down, and large scale cotton mills with large capital will continue to acquire small and medium-sized enterprises.

The rising cost of production has led to a decline in competitiveness of Indonesia's cotton yarn exports, especially from Vietnam and Bangladesh. Indonesia's spinning industry said that textile exports in Vietnam and Bangladesh increased by 1028% and 699% in the past 15 years, while Indonesia increased by only 82%. Vietnam and Bangladesh have lower labor costs to make their textiles cheaper than Indonesia's.

According to analysis, Sino US trade disputes will eventually increase Indonesian clothing exports to the United States and import of US cotton. In 2018/19, cotton imports in Indonesia dropped from 3 million 500 thousand bales to 3 million 51 thousand packages, and 2019/20 is expected to increase slightly to 3 million 100 thousand bales. In 2018/19, Indonesia imported 1 million 180 thousand cotton packages from the United States, while the United States accounted for 38.53% of Indonesia's cotton imports, followed by Brazil cotton (29.06%) and Australia cotton (7.32%). Meanwhile, according to the statistics of Indonesia Textile Association, the export volume of textiles in the 1-7 months of 2019 was 7 billion 600 million US dollars, a decrease of 100 million US dollars compared with the same period last year, mainly exported to the United States (35.58%), Japan (10.87%), China (6.2%) and South Korea (5.05%).

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