Published on January 15, 2026, by The Business Times
By Elisa Valenta
The plan is aimed at modernising and strengthening the sector.
[JAKARTA] Indonesia plans to establish a new state-owned enterprise (SOE) focused on the textile and garment sector, a move aimed at strengthening the industry against external shocks, including US tariff risks and the flood of Chinese textile imports in recent years.
Coordinating Minister for Economic Affairs Airlangga Hartarto announced on Wednesday (Jan 14) that the company will be directly managed by Danantara, the country’s sovereign wealth fund, with an initial funding allocation of up to US$6 billion.
The funds will be directed towards capital equipment procurement, adoption of new technologies and export expansion initiatives. However, he did not specify the company’s expected launch date.
Airlangga said the government has outlined a comprehensive road map for the sector, targeting an increase in textile exports from US$4 billion currently to US$40 billion over the next decade.
The plan also emphasises deepening the domestic value chain, which includes spinning, weaving, dyeing, printing and finishing processes, areas that remain weak in Indonesia compared to regional peers.
“By establishing this new SOE, we aim to drive modernisation and strengthen the industrial backbone of our textile sector,” Airlangga said. “It is crucial to enhance value-chain capabilities to compete internationally and reduce dependency on imported intermediate products.”
The move comes after the US imposed a 19 per cent tariff on select Indonesian textile products, a move that could dampen the country’s competitiveness in a crucial export market.
South-east Asia’s largest economy typically ships around US$2 billion worth of textiles to the US annually, making the tariffs a potentially significant drag on one of its key trade flows.
Indonesia’s textile industry, which employs more than six million workers, has been grappling with mounting challenges, notably from a surge of low-cost Chinese imports.
Local manufacturers have struggled to maintain market share at home and abroad, as cheaper Chinese fabrics and garments continue to undercut Indonesian products. Last year, textile giant Sri Rejeki Isman filed for bankruptcy and laid off over 50,000 workers amid severe financial strain.
Observers have warned that without significant government intervention, the domestic textile sector could continue to lose competitiveness.
Redma Gita Wirawasta, chairperson of the Indonesian Fiber and Filament Yarn Producers Association, said the move aligns with broader efforts to revitalise Indonesia’s manufacturing base and move towards higher value-added production.
However, he cautioned that the plan should be accompanied by measures to improve the overall industry climate, particularly by controlling the influx of illegal textile imports from abroad.
Eko Listiyanto, vice-director of the Institute for Development of Economics and Finance, believes the government’s plan to establish a new textile SOE under Danantara goes too far, as the textile sector can largely be managed by private companies.
“Creating a new entity rather than reviving existing ones, risks competing with struggling private textile firms, potentially isolating them and causing layoffs,” he said.
While the SOE may aim to compete globally, Eko warned it could inadvertently “cannibalise” the domestic textile industry. He suggested that SOEs are better suited for sectors where private companies face significant barriers to entry, which is not the case for textiles.