Indonesian Clothing Firms Cash In on Football Mania

Jakarta Globe, Harso Kurniawan, Jun 15, 2014

Shoppers browse for counterfeit jerseys of the national teams competing
 at the World Cup in Brazil, at a bazaar in Semarang, Central Java. Indonesia
exported $525 million worth of the genuine apparel. (JG Photo/Dhana Kencana)

Jakarta. Football fever will outshine electoral excitement as a fillip to apparel sales, the Indonesia Textile Association chairman predicted over the weekend.

Ade Sudrajad said the association estimated supporter outfits for the 2014 World Cup would add 15 percent to Indonesia’s clothing exports, bringing to $3.5 billion sales over the first six months of this year.

Those $525 million worth of jerseys and jackets would boost overall textile product exports to $13.5 billion, he said.

Sales have also been driven by the demand for T-shirts and other campaign clothing for legislative and presidential elections, Ade said. However since that demand is confined to the local market, Ade said domestic sales were estimated to rise by a little less, to $7.5 billion this year from $7 billion last year.

“The effects of the elections [for sales] was stronger during the 2009 election, but [this year] was not bad. At least, it helped boost demand,” he said.

Last year Indonesia exported textile products worth $12.6 billion. Of that figure 58 percent was contributed by garments, 19 percent by threads, 14 percent by fabrics, and the remaining from other fiber products.

“Export of textile products to May was quite good. There was a rise of around $500 million to $4.8 billion [compared to the period from January-May last year]. One of the boosters is indeed the World Cup,” said Ade.

He said orders for jerseys were flooding in to big textile companies in Indonesia and companies had boosted production to match the demand.

Ade said the main export markets for jerseys made in Indonesia were Europe and Latin America, “because football is very popular in those two regions.”

He said Indonesia was able to benefit from the world’s biggest football tournament as the country is one of the production centers for giant apparel brands such as Nike and Adidas, which produce jerseys for World Cup teams and their supporters.

“Those two brands have ordered jackets and jerseys for men, women and children. This will advantage the local textile companies that have business contracts with them,” he said.

However, Ade said, government policies prevented Indonesia’s textile sector from reaping a bigger World Cup bonanza. Indonesia should have had the capacity to boost textile exports by $1 billion in the first half of this year, beating global competitors such as Vietnam, where production costs are considered lower than in Indonesia.

“There are many constraints for textile companies to boost production, of which most are created by the government. For example, the higher electricity rates announced recently. It will erode the competitiveness of our textile industry,” he said.

With the downstream part of the sector receiving higher demand, the upstream part of the industry was also stimulated, Ade said. There has been a sharp increase in demand for synthetic polyesters to support apparel production. Polyester is used to make threads, for which demand has also increased.

Ade estimated this year’s synthetic polyester production would rise 19.7 percent to 700,000 tons. Last year Indonesia produced 585,000 tons of the polymer.

Overwhelming demand for textile products, according to Ade, forced spinning and weaving companies to import a proportion of fabric and thread to meet a shortfall in domestic production.

Anne Patricia Sutanto, president director at listed textile company Pan Brothers, confirmed the higher demand, saying heavier orders had been experienced since last year.

Pan Brothers, which produces various textile products including cut and sewn knit garments, polo shirts, woven garments and lightweight jackets and pants, booked an 18.5 percent rise in sales to $339 million last year.

Pan’s net income rose more than 50 percent to $10.4 million in 2013.

Anne said last year’s production volume reached 42 million pieces. “From those figures, there were special allocations for the World Cup,” she said.

She said the company had exported World Cup jackets to the United States, Europe and Asia.

Pan Brothers is the biggest listed garment company on the Indonesia Stock Exchange by market capitalization. It regularly receives orders from global apparel makers like Adidas, Nike, Spyder, Lacoste, Nautica and Calvin Klein Jeans. Anne said the textile sector was well placed to boost Indonesia’s economy. Textile products, she said, currently contribute around 10.7 percent to Indonesia’s non-oil-and-gas exports.

The Indonesia Textile Association once released an estimate that Indonesia could boost its market share in the world’s textile market to 5 percent by 2030. Indonesia’s share is now estimated at around 1.8 percent. By that reckoning, textile exports from Indonesia would reach a value of around $75 billion by 2030.

Ade previously said that Indonesia should be more active in participating in global trade deals such as the Trans Pacific Partnership. He said any deals that include Indonesia would help boost exports to the United States.

The Indonesian government has been reluctant to participate in the TPP for fears the pact would not benefit Indonesia as long as domestic industry competitiveness remains weak.