Unraveling Snarls in Textile Industry

Stuttering reform of the Indonesian textile and textile product (TPT) industry has left it unable to fend off pressures as the country’s market share increasingly erodes.

KOMPAS/WAWAN H PRABOWO

Activities of workers in the shoe manufacturing industry in Cikupa, Tangerang, Banten, Tuesday (30/4/2019). The factory employs as many as 15,000 people.

While it is yet to recover fully from the adverse impacts of the Covid-19 pandemic, the labor-intensive industry has again been enduring declining demand as a result of the global economic slowdown and an influx of imported products. Consequently, even though the national economy has begun to pick up, massive layoffs (PHK) continue to haunt this sector (Kompas, 16/5/2023).

As a strategic manufacturing industry and the second-largest industrial sector in terms of labor absorption, the TPT industry has an important structural role in the national economy and employment.

Even so, the industry has continued to be plagued over the decades by various chronic problems that have hindered growth, competitiveness and productivity.

Also read:

> Labour-Intensive Sector Requires Solutions

> Layoffs Still Loom over the Labor-Intensive Sector

The lingering problems that are often the subject of complaints range from lack of integration between upstream and downstream businesses, overdependence on imported raw materials, outdated technology and machines, inefficient industrial governance, and uncompetitive credit interest, to unsupportive infrastructure.

In some cases, government policies are also deemed to discourage the industry, with policies geared more towards providing import facilities than ease and facilitation for developing the domestic industry. In addition, concrete efforts are lacking in stemming the influx of foreign products, especially illegal imports, which threatens the sustainability of the national textile industry.

KOMPAS/TOTOK WIJAYANTO

One of the textile production machines was not operated at the textile factory in Majalaya, Bandung, West Java, due to a lack of incoming orders, Thursday (30/3/2023). The massive import of fabrics that flooded the local market caused the Majalaya textile industry to have a shortage of orders and was unable to compete.

The anatomy of the problems has been identified long ago in this strategic industry, which has existed in Indonesia for more than a century. However, efforts at improving the sector have fallen short, and the industry continues to be overshadowed by the perennial problem of competitiveness in both global and domestic markets alike. Indonesia’s market share continuing to shrink in several main export destinations, while the shares of its competitors like Bangladesh and Vietnam have increased by two- to threefold.

Facing the fourth industrial revolution, the government launched the Making Indonesia 4.0 campaign in 2018 to support the country’s ambition to rank among the world's top 10 big economies by 2030, with the TPT industry among the five strategic sectors on the priority agenda.

Also read:

> Laborers Hope for Prosperity

> Policy to Prevent Layoffs Deemed Urgent

We appreciate the government’s initiatives to strengthen this industry by finding new markets, rejuvenating production machines, adopting safeguards and trade remedies, as well as targeting 35 percent import substitution, offering fiscal incentives, facilitating the procurement of raw materials, lowering fuel prices for upstream industries, and promoting greater use of domestic products (P3DN).

We are waiting for the government's serious commitment to policy implementation, including urgent tightening of import permits, which are prone to abuse, and strict imposition of law enforcement against violators. To save this industry, all stakeholders must give their support, driven by a love for domestic products.

This article was translated by Musthofid.