Weak Regulation and the Decline of the Textile Industry

TEMPO.CO, Jakarta – Another wave of layoffs in the textile industry. This is the result of poor coordination between ministries in developing regulations.

The collapse of the country’s textile industry, resulting in a wave of layoffs, is the result of a disarray in government regulations. Without comprehensive improvements, other industrial sectors could suffer the same fate.

These mass layoffs have occurred in the textile industry as well as in the derivatives sector. According to the Nusantara Confederation of Labor Unions, 50,000 people have been laid off in the textile industry. Recently, 11,000 workers were laid off from six companies. Constant changes in import policies are blamed for these job losses.

An example is the Ministry of Commerce’s regulation on import policy, which was amended three times. Initially, it was regulation No. 36/3023, then No. 3/3024, then No. 7/3024 and finally No. 8/3024. These changes occurred at intervals of just three months. This is a sign of the lack of coordination between ministries, the failure to take into account the aspirations of the people and the government’s inability to set priorities.

The Ministry of Trade Regulation No. 36/2023 was amended because it was opposed by many industries because it caused problems in obtaining chemical raw materials. Regulation No. 3/2024 seemed to address this issue at the time, but in turn, it sparked protests from people returning from abroad as well as migrant workers. Then, Regulation No. 7/2024 was met with more protests from importers because it made it difficult to import goods. Now, the Ministry Regulation No. 8/2024 has been condemned by the textile and derivatives sectors because it led to a flood of imported clothes.

One of the fatal articles in Regulation No. 8/2024 is the removal of technical considerations regarding the import of clothing. Importers are now free to import finished clothing from abroad by simply submitting a one-year import plan. There are no longer any requirements for storage capacity, sales or capital.

The lack of clarity in this regulation has led to a decline in operational activity in factories. According to the Indonesian Textile Association, the utilization of textile and garment factories has now fallen to less than 60 percent of production capacity. Yarn demand has been hit the hardest, falling to just 40 percent.

Given this state of affairs, the government should have sounded the alarm. Something is wrong with our textile industry. If other countries like China can export clothing using dumping practices, the government should have anticipated this by imposing anti-dumping duties and security measures. It turns out that the anti-dumping duty regulation on fabrics has not been extended, despite the industry requesting it as early as 2022.

The government can’t please everyone when it comes to policy. But the government could minimize the pain by prioritizing specific industries that employ large numbers of workers. For example, the textile and textile products industry—along with the food and beverage sector—employs 3.6 million full-time workers.

Jokowi’s government must start making improvements to these chaotic import regulations. Without quick action, the government will create a time bomb that could destroy the national economy.

Read the full story in Tempo English magazine