In SE Asia, Imports Still Reign
January 28, 2009 Textile industries in Southeast Asia concentrate in countries such as Vietnam, Thailand and Indonesia, which do have some cotton production. Some developing countries such as Cambodia might be joining the ranks in the near future, due to strong government support in the industry.
Production and Imports
The meager amount of cotton produced in Vietnam, Thailand and Indonesia does not reach 1% to 2% of their own consumption; it is highly unlikely production will change unless dramatic changes are initiated by their respective governments. For instance, this year, the Indonesian government announced it would allocate budget from the new agricultural bill to support the growth of cotton in the regions of Sulawesi and East/Central Java. However, after the sudden increase of prices and low supply of foodstuffs such as soybeans— one of the staple foods in the Indonesian diet — the planting intention has switched from cotton to soybeans.
Nevertheless, even the cotton planted in Indonesia creates a challenge, as the infrastructure and area of expertise is limited, and there is only one known ginning machine in Indonesia.
Where spinning is concerned, there are no fast-growing countries in SE Asia. Those with the most potential to increase their value and efficiency in the near future are Vietnam and Thailand, which have the luxury of the big market of China and other neighboring countries while their governments are supporting the business and constantly developing infrastructure. Vietnam’s heavy reliance on imported cotton for local textile and garment production has led the industry to seek more capital for material projects like cotton fiber plants. In 2007, the Vietnamese textile and apparel industry imported 212,000 tons, or $268 million (USD) — up 17% and 22.4% respectively over 2006, reports the Vietnamese General Department of Customs. The U.S. shipped 30.1% of that — 63,900 tons at $81 million, while India supplied 32,700 tons and Taiwan provided 15,400 tons. The import price of cotton in 2007 was $1,264 per ton, up by 5% over 2006.
Indonesian spinning mills favored Australian, U.S., Brazilian and West African cotton for their premium needs, while India has come in a big way this season with cheap offerings and good quality. Most of SE Asia has to rely solely on importing cotton from these and other producing countries. Spinwell Market Research estimated a drop of 200,000 bales in consumption this season ending December 2008, to approximately 2.5 to 2.55 million bales. This figure is drawn under the last quarterly consumption review.
A Mixed Future
The free trade agreement between the ASEAN countries has begun to be realized, as evidenced by breaking down entry barriers for textile products between the countries. For example, Indonesian spinners are known to produce better quality yarns for shirting than any other ASEAN country; with the rise of the garment industry in Cambodia, this agreement allows yarn to be produced in Indonesia and woven in Cambodia, which in return creates a better profit margin than producing in Indonesia due to the difference in labor cost and government support through lenient taxes.
Cambodia is opening its doors to the world, and the government created a very good package deal for all foreign direct investments into Cambodia. With lower labor cost in Cambodia than in other textile producing countries, Cambodia provides an advantage for the labor-intensive garment production industry.
With the great volatility in the market, however, Spinwell saw a downward trend on the textile business in a whole, with reported closures of about 27 mills in Turkey, 10 mills in Indonesia and a number of weavers in India.
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