A textile shop on Jalan Pintu Air in Central Jakarta. (JP/Jessicha Valentina)
The government's effort to lure textile manufacturers away from China to the archipelago is facing a rising threat from East African country Ethiopia, which is offering companies a competitive cost structure.
Under an agreement with the United States, namely the African Growth and Opportunity Act (AGOA), Ethiopian exports are not limited by duties and quotas, said Indonesian Textile Association (API) chairman Ade Sudrajat in Jakarta on Wednesday.
The country also has cheap labor and cheap electricity, as low as 4 US cents per kilowatt hour, he added.
"China’s textile manufacturers are shifting their production overseas due to increased labor costs and air pollution. We want to attract them here. But some are already moving to Ethiopia," Ade said during a discussion on the textile industry.
According to data from the Ethiopian Investment Commission, 124 foreign investors have expressed an interest in the Ethiopian textile sector, 71 of which are from China.
Meanwhile, according to data from the Investment Coordinating Board (BKPM), investment realization in the Indonesian textile industry in 2016 decreased by 7.3 percent to Rp 7.55 trillion compared to 8.14 trillion in 2015.
Foreign investors only contributed 42.5 percent in 2016, the lowest in six years.
"Some of our members have actually already invested in Ethiopia," Ade said.
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