SME IN GARMENT IN INDONESIA

International Business: “Globalisation Challenge to the Small and Medium Enterprise in Garment in Indonesia to sustain the business”



International Business: “Globalisation Challenge to the Small and Medium Enterprise in Garment in Indonesia to sustain the business”

Introduction

Indonesia's textile and clothing industry is facing many challenges. On the one hand, the modernisation of mostly obsolete plants is driven to compete successfully in international markets. While, on the other hand, there are more difficult problems in the power supply and the relatively high energy prices. New investment to the financing is often inadequate. Moreover, it hinders illegal imports, mainly from China, which increases the business in the local market.

Indonesia's textile and garment industry is going through tough times. The set of the Indonesian Textile Association (API) ambitious goal, the industry exports of nearly U.S. $12 billion in 2009 to 2015, to $21 billion by 2025 and to increase to 54.0 billion dollars will do, given the current developments, highly unlikely, especially as the problems become more frequent and urgent investments to be carried out only with considerable delays. Although, this could be due to highly export-dependent industry with an estimated 1.2 million people to the global recession relatively well, so that the slump in exports in 2008 and 2009 has kept within the limits. Nevertheless, structural problems in the industry remain largely unresolved and burdening business.

About 82 percent of the industrial looms are older than 20 years and should be replaced with new equipment and technologies. Thus, most Indonesian companies have their main competitors from China, Vietnam, India and Bangladesh as a competitive disadvantage, as the producers in these countries not only have very cheap labour, but are advanced in the modernisation of the industry more than Indonesia. A part of the industry repeatedly highlighted negative factor is also the most worker-friendly labour law, which stands a flexibility of employment, depending on the economy in the way.

Moreover, on the horizon rise to new dangers for the Indonesian producers, linked with the liberalisation of trade in the region and can put a damper on the mood. Many small and medium companies are anxious after the full implementation of the FTA between the Southeast Asian confederation ASEAN and China in early 2010, because of cheap competition from the emerging major economic power in Asia for their livelihood and demanding government support. Already in the past few years, the local market has been flooded with some illegally imported cheap products. According to API, there are about 30% of the clothing items available on the market from unknown sources.

The Scale of International Enterprises in Garment

Globally, countries whose economy has been growing most rapidly are those who participated most actively in globalisation. Countries of East Asia and later Asian Southeast, accelerated industrialisation on the basis of export of manufactured goods. Countries of South Asia are themselves also become major exporters of manufactured goods. Agreements to reduce trade barriers resulting from the Uruguay Round, which are now implemented, impart a new impetus to ...