Uniform fabric producers Nagasakti Kurnia Textile Mills has updated its production, recycling and waste-management systems, and has expanded its range to include hi-tech products in time for Asean integration.
There was a time when a metre of fabric equalled a gram of gold, recalls Alexander Foe, Nagasakti Kurnia Textile Mills’ president and director. Most Indonesian textile companies flourished, but nearly just as many struggled as soon as the market evolved, competition soared and prices plummeted.
“Constant innovation is the key, whether it is with new machinery or more efficient processes,” Foe says. “That, combined with some old-fashioned passion and craftsmanship, is the only way to compete, survive and stand out.”
Alexander graduated with a bachelor for engineering and industrial management from Purdue University. He returned to manage the company in 2013, just as Chinese imports were flooding the market. To make things worse for the industry, many players, including Nagatex, weren’t professionally managed. “Those who couldn’t compete and were badly managed didn’t survive,” Alexander says.
He was shocked, when he took over in 2013, that the company didn’t even keep a financial report. The company was plagued with inefficiencies and possible corruption, which were overlooked because profits were healthy. With the presence of stronger competition threatening Nagatex’s existence, Alexander had no choice but to do a radical restructuring and modernization, that included getting rid of some of the senior staff hired by his father.
One crucial decision that saved the company was a shift to uniform fabrics in 2003, as other segments were more vulnerable to cheap Chinese imports. The only uniform fabric that Nagatex cannot make is military fabrics, as these require different machinery and have much higher technical requirements. Today, about 90% of Nagatex’s production is uniform fabrics with an annual production that can reach more than 20 million meters of fabrics. “We currently hold 30% market share in uniform fabrics segment,” Alexander says, and Nagatex is among the top five local producers in the uniform fabrics market.
While producing fabrics that go into millions of uniforms in Indonesia, the segment is not without its challenges. The textile industry overall only grew 1.8% last year, much slower than the national GDP growth. Surprisingly, tax reform may have contributed to slower growth. The government is now trying to raise tax revenues by targeting smaller businesses (usaha dagang rather than a PT), which often pay little or no taxes. Many of these companies are Nagatex customers, and the tax squeeze means they are slowing down or even going out of business. “I support these changes are for a better future, but these drastic changes do hurt the industry players,” Alexander says. To offset the slower domestic demand, Nagatex is now increasing its exports. Currently about 10% of its production is exported—to Europe, the Middle East, and Asia, with Japan being the biggest international market for the company.
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