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Indonesia’s Textile Industry at a Crossroads: Untangling the Challenges and Finding Solutions

24 Mar 2025

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Indonesia’s Textile Industry at a Crossroads: Untangling the Challenges and Finding Solutions
By Lydhia Firlanda

Indonesia’s textile and garment industry has long been a pillar of the national economy, providing millions of jobs and contributing significantly to exports. However, in recent years, the industry has faced mounting challenges that threaten its survival. This article explores the factors behind the decline of Indonesia’s textile industry and examines potential solutions to restore its former strength.  

Key Challenges Facing the Textile Industry

  1. A Flood of Imported Textile Products

One of the biggest threats to Indonesia’s textile industry is the massive influx of imported textile products. Many of these imports are sold at significantly lower prices, making it difficult for local producers to compete. Additionally, illegal imports and bulk import practices have further worsened the situation, pushing domestic manufacturers to the brink of collapse.

  1. Inconsistent Government Policies

A lack of coordination in government policies has exacerbated the crisis in the textile industry. Policies on raw material imports, taxation, and trade regulations often do not align with the needs of local manufacturers. As a result, businesses struggle to obtain high-quality raw materials at competitive prices, increasing production costs and reducing their ability to compete.

  1. The Bankruptcy of Major Textile Companies

The collapse of large textile firms, such as PT Sri Rejeki Isman Tbk (Sritex), has sent shockwaves throughout the industry. Sritex, once a leading textile giant employing around 50,000 people, is now burdened with $1.6 billion in debt and facing bankruptcy. The fall of such a major player has not only affected its workers but also created a ripple effect that threatens the entire sector.

  1. Declining Consumer Purchasing Power

Despite the flood of imported products, domestic demand for textiles remains weak due to the declining purchasing power of Indonesian consumers. Many households are cutting back on spending, leaving both imported and local textile products unsold, further deepening the crisis.

Impact on the Workforce

The combination of these factors has led to widespread layoffs (PHK) across the textile sector. Many companies, struggling to stay afloat, have been forced to downsize their workforce to cut costs. These job losses not only impact the livelihoods of thousands of workers but also contribute to rising unemployment and place an additional burden on government social programs.  

Solutions and Recommendations 

To revive Indonesia’s textile industry, a coordinated and strategic approach is needed. Some key measures that could help include:  

  • Harmonizing Government Policies – The government must align regulations on raw material imports, taxes, and trade policies to support, rather than hinder, the domestic textile industry.  
  • Cracking Down on Illegal Imports – Stronger enforcement is needed to prevent illegal and bulk textile imports from flooding the market and undercutting local manufacturers.  
  • Financial Support and Debt Restructuring – The government should consider financial aid programs or debt restructuring options for struggling textile companies to prevent mass layoffs and ensure business continuity.  
  • Enhancing Competitiveness – The textile industry must invest in innovation, improve product quality, and adopt more efficient production techniques to stay competitive against imported goods.  

Conclusion
Indonesia’s textile industry is at a turning point. While the challenges it faces are complex, they are not insurmountable. With the right policies, better coordination between the government and industry players, and a strong commitment to innovation, the sector has the potential to rebound and once again become a key driver of economic growth.  

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