Indonesia is preparing to launch a new state-owned enterprise (SOE) dedicated to the textile and garment sector, a move aimed at protecting the industry from external shocks such as US tariff risks and the surge of low-cost imports from China.
The plan was announced on January 14 by Airlangga Hartarto, Coordinating Minister for Economic Affairs. He said the new company will be managed by Danantara, Indonesia’s sovereign wealth fund, with an initial funding allocation of up to US$6 billion. While a launch date has not been confirmed, the funds are expected to be deployed for capital equipment procurement, adoption of new technologies, and export expansion initiatives.
Ambitious Export Targets and Value-Chain Upgrades
According to Airlangga, the government has drafted a comprehensive roadmap for the sector that targets a tenfold increase in textile exports—from US$4 billion to US$40 billion over the next decade. Central to the strategy is deepening Indonesia’s domestic value chain, particularly in spinning, weaving, dyeing, printing, and finishing, segments where the country lags behind regional peers.
“By establishing this new SOE, we aim to drive modernisation and strengthen the industrial backbone of our textile sector,” Airlangga said, adding that upgrading value-chain capabilities is essential to compete internationally and reduce reliance on imported intermediate goods.
Tariffs, Imports, and Industry Strain
The announcement comes as the United States has imposed a 19% tariff on selected Indonesian textile products, a move that could weigh on a key export market. Indonesia typically exports around US$2 billion worth of textiles annually to the US, making the tariffs a potentially significant drag on trade flows.
Domestically, the industry—employing more than six million workers—has been under pressure from a flood of cheaper Chinese fabrics and garments. The challenges were underscored last year when Sri Rejeki Isman filed for bankruptcy, leading to the layoff of over 50,000 workers.
Mixed Reactions from Industry and Economists
Industry representatives have welcomed the government’s renewed focus. Redma Gita Wirawasta, Chairperson of the Indonesian Fiber and Filament Yarn Producers Association, said the initiative aligns with broader efforts to revitalise manufacturing and move toward higher value-added production. However, he cautioned that success will depend on parallel measures to improve the business climate, including curbing illegal textile imports.
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Others have expressed concern. Eko Listiyanto, Vice-Director of the Institute for Development of Economics and Finance, warned that creating a new SOE could compete with struggling private firms, potentially leading to further layoffs. He argued that textiles are a sector where private companies can operate effectively and cautioned against the risk of the SOE “cannibalising” the domestic industry.
As Indonesia weighs the balance between state intervention and private-sector vitality, the proposed textile SOE marks a significant policy shift aimed at shielding a critical industry while pursuing long-term export growth.
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