15 Chinese Textile Companies To Relocate To Indonesia

Fifteen Chinese textile companies will relocate their plants to Indonesia because of lower production costs. The relocation is estimated to cost Rp 5 trillion.

Budi Irmawan, Director of the Textile Industry of the Ministry of Industry, said that the relocation can absorb Indonesian manpower. Also, raw materials suppliers are expected to benefit from the relocation.

The representatives of the 15 companies have already reserved 200 hectares from Indonesian developers. This will be the site of the plant for raw materials processing to finished goods. The companies will start to move by Q2/2011.

"Land reservation was conducted last year and now it’s location preparation," he told IFT.

Ade Sudrajat, Chairman of the Indonesia Textile Association (API), explained that there are 100 plants to be relocated, but temporarily there are only 15 companies. "I cannot share the names of the companies," he said.

Relocation will follow the signing of the memorandum of understanding between API and the Chinese Textile Companies Association by the end of September 2010.

Chinese Textile Companies see Indonesia as an ideal location for relocation because labor wages are lower, raw materials are available and the political condition is more stable. In the meeting in China, the Chinese employers asked API to facilitate all requirements for relocation.

The government needs to support the relocation plan because if not, Vietnam and Cambodia will take the opportunity. There were 90 Chinese textile plants that relocated to Vietnam last year.

Chinese textile industry revenues decreased due to higher average worker’s wage of US$ 247 per month or Rp 2.2 million per month, meanwhile Indonesian average wage is US$ 140 per month.

Chinese textile price is also predicted to increase by 3 percent due to the rising interest rate of the People’s Bank of China from 5.56 percent to 5.81 percent in the beginning of 2011. China also decreased exports throughout the world, including Indonesia.

This led to relocation to countries that are more conducive for investments. Vietnam and Indonesia are alternatives for relocation due to the low wages at US$ 80 per day. Currently, China remains the largest textile producer in the world with 12,000 companies dominating the market in North America and average sales of US$ 48 billion per year.