Indonesia’s Textile Crisis 2025: Investor Flight, Surging Imports, and an Uncertain Future

Indonesia’s textile industry, once hailed as a backbone of national manufacturing, is now undergoing one of its most difficult periods in decades. Investor withdrawal, factory shutdowns, and widespread layoffs have put the sector under severe strain. Recent reports show that foreign investors cancelled projects worth around USD 250 million (approximately IDR 4 trillion) after the government rejected proposed anti-dumping duties on polyester oriented yarn (POY) and draw textured yarn (DTY). Without these safeguards, imported products continue to penetrate the domestic market at far lower prices, weakening the viability of local producers.

Factories across Java have quietly closed, leaving contracts unfulfilled and forcing mass layoffs. According to the Indonesian Filament and Fiber Producers Association (APSyFI), imports of filament yarn have surged between 70 and 300 percent since 2017, depending on the product type. This surge has eroded domestic capacity and created a structural imbalance that companies have struggled to absorb.

At the same time, the global trade environment is turning increasingly hostile. The United States, Indonesia’s largest market for garments and textiles, has imposed tariffs of up to 32 percent on selected products. Anti-dumping margins could rise as high as 42.30 percent for POY and DTY, two key inputs for synthetic fabrics. These measures directly increase production costs and further weaken competitiveness.

For workers, the consequences are already visible. Thousands have been laid off or placed on unpaid leave as companies cut production or cease operations altogether. Both large-scale producers and small enterprises face mounting difficulties as they grapple with rising costs, falling demand, and the continued flood of imports.

Industry Performance and Structural Vulnerabilities

The Indonesian textile and textile product (TPT) industry has experienced significant fluctuations over the past decade, closely tied to both domestic and global economic conditions. In 2024, the sector was valued at IDR 141.3 trillion, marking a modest recovery from the pandemic-driven contraction in 2020 when the industry shrank by 8.88 percent. Between 2015 and 2019, the industry enjoyed stable growth of around 4.2 percent annually, supported by export demand, competitive labor, and government incentives for labor-intensive industries.

However, the trajectory shifted after 2020. The industry grew strongly by 9.34 percent in 2022 but then slipped by 1.98 percent in 2023, underscoring its vulnerability to supply chain disruptions, weaker demand in the US and EU, and intensifying competition from Bangladesh and Vietnam. Exports stood at USD 12.75 billion in 2022, down from a peak of over USD 13 billion in 2019. A modest rebound in 2023 was driven by basic apparel and home textile orders from the US, yet structural disadvantages remain, such as higher input costs, weaker trade agreements, and limited integration across the value chain.

Domestically, subdued purchasing power and inflation have restrained growth. In addition, a surge in low-priced imports, particularly from China, has further eroded local competitiveness. Segment-wise, the downstream garment and apparel industry contributes 45–50 percent of value added, while weaving, dyeing, and finishing (midstream) account for about 30 percent. Fiber and yarn production (upstream) contributes the remaining 20–25 percent. This reliance on labor-intensive downstream production highlights structural weaknesses, particularly when compared with other manufacturing subsectors such as basic metals and food and beverages, which recorded stronger and more resilient growth.

By 2024, the TPT industry regained some momentum with 4.26 percent growth, supported by domestic consumption, renewed export orders, and gradual infrastructure improvements. Looking ahead, forecasts suggest moderate expansion of 3.8 percent in 2025, contributing IDR 225.1 trillion to GDP. Between 2025 and 2028, growth is projected to stabilize at 2.5–3.0 percent CAGR.

Three main drivers are expected to support this trajectory:

1. Sustainability and Certifications: Adoption of eco-friendly practices and compliance with ESG standards will improve competitiveness in international markets.
2. Supply Chain Diversification: Global fashion brands are reducing reliance on China, presenting opportunities for Indonesia if efficiency and logistics are strengthened.
3. Digital Modernization: Industry 4.0 initiatives such as automation, weaving, spinning, and quality control improvements are expected to boost productivity and reduce reliance on low-cost labor.

Yet, persistent obstacles remain. Outdated machinery in midstream facilities, rising energy costs, dependence on imported raw materials, and limited access to financing weigh heavily on growth. Regulatory inconsistencies in taxation, import tariffs, and labor laws further deter investment.

Trade Dynamics and Policy Responses

Exports remain central to the sector’s survival. In the first quarter of 2025, TPT exports to the United States reached USD 1.85 billion, reaffirming the US as the largest market. However, according to the Indonesian Textile Association, demand from the US could decline by as much as 30 percent if protectionist tariff measures are fully enforced.

Indonesia’s dependence on imported raw materials also remains high. As of October 2023, imports reached USD 19.32 billion, covering 60–70 percent of domestic demand. Illegal imports are another pressing issue, with an estimated 432 thousand tons of second-hand clothing entering Indonesia in 2022, displacing around 22 percent of domestic consumption.

In terms of policy, government support has been directed toward industry modernization. Based on a press release from the Ministry of Industry cited by Antara News (2023), the government allocated IDR 4.7 billion for textile machinery restructuring programs aimed at improving efficiency and competitiveness. This initiative is aligned with the Making Indonesia 4.0 roadmap, which identifies textiles as one of six priority sectors for adopting technologies such as AI, IoT, and automation (The Indonesian Post, 2023).

Conclusion: The Need for a Clear Roadmap

Indonesia’s textile industry is at a decisive juncture. On one hand, there are real opportunities in sustainability, modernization, and global supply chain diversification. On the other, unresolved structural weaknesses, policy inconsistencies, and reliance on vulnerable export markets threaten long-term competitiveness.

Without a concrete and consistent roadmap, the risks are clear: investor flight, continued factory closures, and a gradual process of deindustrialization. To safeguard the industry, the government must act swiftly to provide import safeguards, ensure investment certainty, and accelerate modernization incentives. If executed effectively, these efforts could reposition the textile sector as a vital engine for manufacturing exports and employment. If neglected, the industry risks further decline, with consequences that will ripple across Indonesia’s economy and society.