Indonesia's Textile Prices Will Increase By 16 Percent

The prices of textiles and related products will increase by 16 percent due to a provincial minimum wage hike and an increase in electricity prices in 2013, according to the Indonesian Textile Association (API).

"With an increase in the cost of labour and a rise in electricity tariffs in 2013, textile producers will increase the prices of their products by 16 percent. This way, a certain percentage of the cost of production can be covered," Indonesia's Antara news agency quoted the Secretary General of API, Ernovian G. Ismy, as saying on Monday.

According to him, the minimum wage hike, from Rp1.5 million to Rp2.2 million (US$156.45 to US$229.45), will affect textile businesses badly since most of the businesses are labour-intensive in nature. Some of them are Small and Medium Enterprises (SMEs), which are affected by changes in the country`s regulations.

"Many businesses hope that the government will review the increase in electricity tariffs and the provincial minimum wage hike," he added.

Ismy added that apart from increasing the production cost, the provincial minimum wage hike will force some textile producers to reduce the number of employees in their firms.

"Several companies that are members of the API have planned to lay off 2,000 employees, while foreign textile producers have stated that they will reduce the number of employees in their firms by 20 percent in January 2013," he said.

He said that these measures are necessary for local textile producers to compete with firms from China and India, particularly in the domestic market.

"The local manufacturers only control about 46 percent of the domestic market. Therefore, the minimum wage hike policy will reduce the competitiveness of the textile firms," he explained.