JEANS IN INDONESIA

Indonesia is a country with great potential for jeans production and overall textile products. Indonesia has a population of around 240 million people. Per capita income is around 4000 USD per year. The country has cotton production and denim facturing facilities. Please see following graph see Indonesia cotton Indonesia has a big jeans local market as well as an export market. Local brands and manufacturers such as Lea Jeans, Trijaya, Sunrise, Ruffneak, Darahkubiru, Nipmuc, etc. Some foreign brands also operate in the country to supply local market as well export. COmpanies such as Levis, Mark Spencer, Lois, do have presence in the country. The two main jeans manufacturing areas are in Bandung and around Jakarta. Denim makers in Indonesia like Tyfountex are important to the local industry. Please check the following link for more information check TYFOUNTEX

        

There are few top notch factories equipped with  the latest technological advances. Companies like Lea Jeans are examples of companies that have done big investments in capital infrastructure and equipment. They are able to do many fashion jeans styles. Smaller firms do use more modest technology but certainly they still do have a market niche to target within the country for low income people that cannot afford expensive jeans.


Indonesia has significant production of apparel products, however the majority of apparel products manufactured in Indonesia are exported overseas. Numerous local companies sell their products in the domestic market, but many players in apparel in Indonesia are non-locals. Multinational companies typically import the products for the premium brands, usually made in other Asian countries such as China. Some multinational branded products are made in Indonesia, outsourced by the foreign companies that own the brands. Low-priced Chinese products were also imported by distributors and compete with local products in the market.
With the emerging middle class phenomenon in Indonesia, consumers pay more attention to the quality of apparel products they purchase and tend to associate branded multinational products as being of superior quality to local brands. While the quality of local production is comparable to production in countries such as China and Vietnam, where most of the multinational branded products are made, it is hard for the local companies to remove this perception. Historically, a number of local companies tried to use foreign names for their brands to give the image that their products are high quality non-local brands. The perception of imported products as being of higher quality also allowed local company Mitra Adi Perkasa Tbk PT to succeed with the biggest retail value share in apparel in 2011. The company's success was mainly due to its acquiring the licence to distribute and market various multinational apparel brands in Indonesia. Despite these factors, local companies still have good presence due to the affordability of the products, especially in jeans and men’s outerwear.


 The textile industry in general has been suffering from rising costs and tough foreign competition. Utility prices have significantly increase in Indonesia. Indonesia inflation rate has ben quite high, around 6%. See graph below:





Local currency has been "relatively stable", thefore making it difficult to keep up with inflation rates year after year. It has been some appreciation vs the USD. The gap has contributed to limit export business and rising production costs in the country.



Indonesia is still a country of great potential, for local market and export market as well. The industry needs a push from local government to create competitive production environment. More tax incentives, free zones areas, limit by law utility rates in free zones, are few examples of issues that must be considered in order to support the export jeans economy. Indonesia has a big source of labor and the working environment is attractive to foreign firms as the country offers many  opportunities in terms of business and nice environment for expat community.

Apparel has good prospects to grow strongly in Indonesia, as the frequency of purchase for various products was low in 2011 and there is potential for consumers to buy the products more often. Continued growth in the economy and emerging middle class will encourage consumers to buy new items of clothing or footwear more often. In addition, the struggle with the image of producing lower quality goods compared to foreign brands faced by local companies can be overcome as consumers become more educated and if the government provides more backing and support to local companies. Furthermore, retail expansion in the country led by large retailing chains, and increased availability of both local and international brands in the country, will also boost growth of apparel. Volume growth of apparel in the forecast period is set to be a healthy 2% CAGR


Recent protests in different cities for claiming higher wages for garment workers is a serious threat to the jeans industry, specially for export market and foreign income inflows. Please see the article attached of recent protests.
check protests in Indonesia


 In Jakarta the minimum wage was raised to 2,200,000 (USD 228) after protests in 2012. This wage seems too high if we compare to competing countries like China, Vietnam, Cambodia (US$75 per month, plus a $5 healthcare allowance, for the garment sector). I think that the solution for Indonesia´s export garment sector must receive support from local government with free zone incentives or related. Textile education also must be improved at vocational schools and universities in order for new generations to move towards value added products. This is a possible combination of course of actions to be undertaken by local government. Jeans market niche and textile sector in general still can be a big source of jobs for the indonesian economy but needs close collaboration between government, companies and labor force.