The relaxation of government regulations is worsening the situation of the textile industry in Indonesia

The Indonesian textile industry is one of the pillars of the country’s economy and one of the largest non-oil and gas contributors to the Indonesian economy. From Indonesia’s independence until 2000, the textile industry grew rapidly and was able to absorb almost 60% of the country’s labor force. However, in the current era, as the world recovers from the disaster of the Covid-19 pandemic, this industry is starting to decline and is struggling to rebuild. The sluggishness of the Indonesian textile industry is due to the rise of predatory pricing, in which an illegal strategy of selling goods below price is used, which is one of the trade tricks aimed at monopolizing the market. Consumers will, of course, look for sellers who sell goods at low prices. Overall, predatory pricing practices have many harmful effects on all parties. In Indonesia, trade practices using this system should receive a stern warning from the Ministry of Cooperatives, Small and Medium Enterprises.

The state of Indonesia’s textile industry is very worrying, which is generally due to the economic conditions during the Covid-19 pandemic and then geopolitical factors in the form of the war between Russia and Ukraine, which has resulted in a change in spending priorities for Indonesian textile consumers from other countries, especially European countries . Another factor is the shift of the textile industry from China to Indochina (such as Cambodia, Laos, Vietnam and Myanmar) and IPB (India, Pakistan and Bangladesh), which has increased the competitiveness of Indonesia’s textile industry in the world market.

The advent of the Minister of Trade Regulation No. 36 of 2023 was enough to make the textile industry breathe a sigh of relief as there was a strong protection against illegal imports, but by changing this regulation to Minister of Trade Regulation No. 8 of 2024 which again provided leniency for incoming imports, it has again brought the textile industry into a loss as there is no strong lobster protection for domestic goods intended for textile production. This is of course a very big controversy considering that the textile industry in Indonesia employs at least 3.6 million workers every year from 2022 and contributes about 6.38 percent of the GDP from the non-oil and gas sector in the same year. The downturn in the textile industry will of course have a huge impact on the absorption of labor and the foreign exchange earnings of the country. The existence of inconsistencies in government regulations is enough to hamper the functioning of the textile industry, especially in the face of external factors such as geopolitical conditions and price competition in the global market.

Being one of the largest producers of textile goods in the world, Indonesia does not have enough protection from its own government in securing domestic products. Indonesia has not implemented an anti-dumping policy and is instead increasingly encouraging illegal imports. In fact, exporting textile goods abroad is becoming increasingly difficult due to changes in government regulations in other countries, while tariffs from Indonesia are less stringent when illegally imported products enter. This, of course, causes the further decline of the textile industry. We hope that with the inauguration of Indonesia’s new president, a coherent comprehensive policy will be introduced that can further protect Indonesian textile goods so that they can recover.