Indonesian textile sector under jeopardy, imports lead to closure of 21 factories

The Indonesian textile industry is facing major challenges due to the surge of low-cost Chinese imports and current disruptions in global supply chains.

Shinta Kamdani, the General Chair of the Indonesian Employers’ Association, emphasised the vulnerability of Indonesia’s textile and garment industry due to dwindling market share domestically and waning competitiveness in global exports. She pointed out that the fall of the rupiah is adding more strain to this sector.

According to a report, Indonesia saw the closure of 21 textile factories in 2023, ensuing in 150,000 job losses at large and medium-sized facilities alone. A further 31 factories are considered at risk of closure. Redma Gita Wirawasta, Chairman of the Indonesian Fibre and Filament Yarn Producers Association (APsyFI), shared that textile factories are presently running at 72 per cent capacity due to the industry decline.

Wirawasta credited the rise in textile imports from China to factors such as the COVID-19 pandemic and the ASEAN-China Free Trade Agreement. The current impact of the Ukraine conflict has also added to the market disruptions.

The Indonesian textile industry has been harshly affected, with Nandi Herdiaman, Chairman of the Ikatan Pengusaha Konveksi Berkarya (IPKB), stating that 60 per cent of small and medium-sized enterprises in the sector have stopped operations. Those still functioning are running well below capacity, amidst fear that imported products are controlling both offline and online domestic markets.

Together APsyFI and the Indonesian Employers’ Association have raised alarms over the decline of the Indonesian rupiah against the US dollar, further worsening the industry’s challenges.

In spite of these setbacks, Indonesia’s viscose fibre industry has displayed promising growth as worldwide consumption patterns change, supported by major investments in domestic production capacity. In early 2024, efforts were made to reinforce bilateral trade ties between Indonesia and Bangladesh, especially in the apparel and textile sectors, reflecting current regional economic dynamics.