Textile manufacturer adapts to changing times
RENOWNED FOR ITS INNOVATIVE TECHNIQUES, COST-EFFECTIVENESS AND QUALITY, INDONESIA'S TEXTILE SECTOR REMAINS ONE OF THE PRIME ENGINES OF THE COUNTRY'S ECONOMY

Textiles are one of Indonesia’s major non-oil and gas export products. Although the country’s textile exports to the U.S. reached $8.2 billion in 2000, estimates for 2001 were less optimistic due to the global economic slowdown and the September 11 attacks. The textile sector is not only Indonesia’s largest foreign exchange earner, but also its largest job provider, employing no less than 1.2 million workers. Expecting a 30% reduction in 2001 exports due to the slump, companies resorted to layoffs (numbering almost 12,000), reduced work hours, and production cuts. However, things are expected to improve this year as the global economy regains confidence and President Megawati’s government has implemented new quota measures intended to help raise the level of exports and create a more secure climate for textile exporters.

Indonesia’s leading textile company, and one of the largest in South East Asia, is Texmaco, and Polysindo, its subsidiary, is the country’s leading polyester manufacturer. Texmaco has over 40 years of experience in integrated operations from purified terephthalic acid, polyester chips, yarn, fiber, fabrics and garments, backed by a strong commitment to quality, punctual delivery, and cost-effectiveness. The company’s innovative capacity is nowhere more apparent than in its creation of polyester fleece and coated products, which became its hottest tickets within three seasons of their introduction. Texmaco is also widely known for its print collections and well positioned for future entry in the niche market of industrial fabrics and home furnishings.

RAVI SHANKAR Head of Textiles of Texmaco

Looking forward in an uncertain time, Texmaco, which employs some 40,000 people in the country, is betting on its comparative advantages and creative strengths to ensure its future. Founder Marimuti Sinivasan and Head of Textiles Ravi Shankar state, “it will not only be competitive advantages that count in the future, but also creative ones. And this is what Texmaco is all about.” Unlike many textile producers who abandon fabric and garment operations once they become involved in upstream processes, Texmaco has never lost its focus on its core fabric business. On the contrary, the company sees its knowledge of upstream manufacturing as a complimentary strength to build further value added products. In the short-term, Texmaco plans to rely on its strategic package offers, F2G (Fabric to Garments), which specialize in performance and work wear for both men’s and ladies divisions. “In the future we will deal with textile raw materials in creating high quality performance fabrics, our range going from performance wear like skiwear and winter clothing to more industrial materials such as bed clothing and furnishings. There is added value and complexity there as manufacturing and technology are involved, so the barrier of entry is higher. We will always go for the more complex product so that we can maintain an advantage. That, together with our extensive labor market, low energy costs, and capabilities in machinery production, will make us competitive in the international market.”

Ironically, Texmaco’s innovative skills and continual quest for new creative solutions have also been their downfall, and, for the moment, the future of the company much depends on the Indonesian Bank Restructuring Agency (IBRA). IBRA possesses 70% of Texmaco’s shares and has assumed the company’s restructuring supervision, including appointing Price Waterhouse to monitor cash flows. Just before the financial crisis hit Indonesia in 1997, Texmaco borrowed heavily to finance its expansion in textile related engineering endeavors. With the rupiah’s depreciation during the crisis, the company’s debt (much of it in U.S. dollars) ballooned. When the banking industry finally collapsed, the debt was taken over by IBRA. Thus, for many, Texmaco is a symbol of the changes that began in Indonesia with the onset of the Asian crisis. As has often happened during the company’s 40 years in business, also corresponding with periods of great political and social change in Indonesia, Texmaco is once again being forced to shed its skin and adapt to changing times. But both Mr.
Sinivasan and Mr. Shankar are confident that the company will repay its debts and take back its shares within the next seven years.