The Leather, Leather Goods and Footwear Industry and the Textile and Apparel Industry grew positively in Q1-2024, by 5.90 percent (yoy) and 2.64 percent (yoy) respectively (BPS data). This improved performance also lifted the processing industry's contribution to economic growth to 19.28 percent (yoy), up from 18.57 percent (yoy) in the same period of 2023.
“This implies that the processing industry is still the main engine of Indonesia's economy,” the Director of Textile, Leather and Footwear Industries (ITKAK) at the Ministry of Industry, Adie Rochmanto Pandiangan, said in Jakarta on Tuesday (14/5).
The positive growth of the textile, apparel and footwear industries is due to still-strong foreign and domestic demand. In Q1-2024, foreign demand increased in volume by 7.34 percent (yoy) for textiles, 3.08 percent (yoy) for apparel and 12.56 percent (yoy) for footwear.
Besides export orders, stable domestic household consumption also helped drive growth in the Textile and Apparel Industry and the Leather, Leather Goods and Footwear Industry, in line with the 2024 elections, national holidays, collective leave and the Eid holiday.
The growth is also in line with the Industrial Confidence Index (IKI) for the textile, apparel and leather, leather goods and footwear industries, which continues to rise. For the textile industry, April 2024 saw an increase to expansion for the first time since IKI was launched in November 2022. Meanwhile, the apparel industry has been expanding continuously since November 2023, and the leather, leather goods and footwear industry since July 2023.
“The increase in production variables and high inventory shows that output from the textile, apparel and leather, leather goods and footwear industries is being absorbed optimally by the market,” Adie stressed.
In line with GDP growth and IKI data, Bank Indonesia (BI) also recorded improved performance in Q1-2024. According to BI's Prompt Manufacturing Index (PMI-BI), the textile and apparel industry rose and was in expansion with an index of 57.40 percent, and the leather, leather goods and footwear industry at 55.36 percent. The leather, leather goods and footwear industry's performance in Q2-2024 is even expected to be in expansion with the highest index, 61.07 percent.
In terms of realized investment, investment in the Textile and Apparel Industry and the Leather, Leather Goods and Footwear Industry has also risen, from IDR 24.6 trillion in 2022 to IDR 27.9 trillion in 2023. In Q1-2024, investment in these industries reached IDR 6.9 trillion. On average in 2022–2024, textiles accounted for 40% of investment, apparel 20%, and leather, leather goods and footwear 40%. Stable realized investment in this period indicates that productivity in the textile, apparel and footwear industries remains promising.
“In fact, as production increases, the apparel and footwear industries have reported difficulty finding workers. Several SMIs in West Java are currently struggling to find sewing workers. Likewise, a new footwear company investing in Indramayu is having great difficulty meeting its need for 5,000 workers,” Adie added.
The ITKAK Director stressed that import policies and regulations under Minister of Trade Regulation 36/2023 on Import Policies and Regulations, last amended by Permendag 7/2024, are expected to protect the domestic market from a flood of imports. This is expected to be a breath of fresh air for domestic industry to keep increasing production and attract investment in the sector. The impact of the policy has begun to be felt with improved performance in the textile, leather and footwear industries in Q1-2024.
“Kemenperin is optimistic that the growth of the textile, leather and footwear industries will be even greater if efforts to prevent consumption of used clothing (thrifting) and market supervision of imported goods in line with applicable rules are stepped up,” Adie concluded.
Source: Press Release of the Ministry of Industry of the Republic of Indonesia