INDONESIA: Manufacturers fear hike in electricity prices
Increasing power tariffs in Indonesia could force textile and garment manufacturers to double their raw material imports, the chairman of the Indonesian Textiles Association (API) has warned.
The API chair, Ade Sudrajat Usman, told just-style that electricity consumption already constitutes 15% to 20% of production costs for textile manufacturers in the country. And he said new power bill increases of up to 64.7% - which began to take effect as of 1 May - will be a significant blow.
Fabric production especially is an electricity-intensive process, and Ade said garment producers may be forced to look to Japan, Korea and China to for more raw materials if domestic producers are priced out of the market.
Ade is concerned that the increased electricity tariffs go against the government's aim of improving competitiveness in domestic industries - especially during the first phase of market integration between the ten Association of Southeast Asian Nations (ASEAN) through the upcoming ASEAN Economic Community (AEC), which scheduled to come into being from 2015.
Investment in the textile industry will also be hampered this year by the Bank of Indonesia's decision to raise interest rates.
However the API remains optimistic that the textiles and apparel sector will experience significant growth in exports during 2014, owing to the recovering economic climate in United States and the European Union - Indonesia's biggest export markets.
Earlier this month the Indonesian Employers Association (APINDO) confirmed it is considering proposing a nationwide tiered system of minimum wages based on the size and sector of businesses.
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