Government Regulations Relaxation Exacerbates Indonesia’s Textile Industry Condition

The Indonesian Textile Industry is one of the pillars of the economy in this country, and one of the largest contributors to the Indonesian economy from the non-oil and gas sector.

The Indonesian Textile Industry is one of the pillars of the economy in this country, and one of the largest contributors to the Indonesian economy from the non-oil and gas sector. Since Indonesia’s Independence until 2000, the textile industry developed very rapidly and was able to absorb almost 60% of the workforce nationally. However, in the current era, where the world is recovering from the Covid-19 pandemic disaster, this industry is starting to decline and having difficulty recovering. The sluggishness of the Indonesian textile industry is caused by the rise of Predatory Pricing, where there is an illegal strategy of selling goods below price, which is one of the trade tricks aimed at market monopoly. Naturally, consumers will look for sellers who sell goods at low prices. In general, predatory pricing behavior has many detrimental impacts on all parties. In Indonesia, trading practices using this system should receive a strong warning from the Ministry of Cooperatives, MSMEs.

The condition of the textile industry in Indonesia is very worrying, which is generally caused by economic conditions during the Covid-19 pandemic, followed by geopolitical factors with the war between Russia and Ukraine, which has caused a shift in priority spending for Indonesian textile consumers from other countries, especially in the European countries. Another factor is caused by the shift in the textile industry from China to Indo China (such as Cambodia, Laos, Vietnam and Myanmar) and IPB (India, Pakistan and Bangladesh) which has increased the competitiveness of the textile industry in Indonesia in the world market.

The emergence of The Regulation of the Minister of Trade Number 36 of 2023 was enough to make the textile industry breathe a sigh of relief because there was solid protection against illegal imports, but by changing this regulation to The Regulation of the Minister of Trade Number 8 of 2024 which again provided relaxation for incoming imports, again brought the textile industry down the drain because there is no lobnger strong protection for domestic textile production commodities. This is of course a very big polemic, considering that the textile industry in Indonesia absorbs at least 3.6 million workers every year starting in 2022 and contributes around 6.38 percent of GDP from the non-oil and gas sector in the same year. The downturn in the textile industry will of course greatly affect labor absorption and the country’s foreign exchange earnings. The existence of inconsistencies in government regulations is enough to make things difficult for the textile industry, especially with external factors such as geopolitical conditions and price competition in the world market.

Being one of the largest textile commodity producers in the world, Indonesia does not have enough protection from its own government in securing domestic products. Indonesia has not implemented anti-dumping policies and instead is increasingly encouraging illegal imports to enter. In fact, overseas exports of textile commodities are becoming increasingly difficult due to changes in regulations from governments in other countries, while customs duties from Indonesia are less stringent when illegal imported products enter. This of course causes the textile industry to decline further. It is hoped that with the inauguration of Indonesia’s new president, there will be a consistent comprehensive policy that can further protect Indonesia’s textile commodities so that they can recover.

Sekarsari Sugihartono
Sekarsari Sugihartono
I am an international relations master's student at Gadjah Mada University. My interests are SDGs and International Trade Dispute.