Indonesia’s Textile Industry: A Slippage into Deindustrialization
Jakarta, CNBC Indonesia – The Indonesian textile and textile product (TPT) industry, which once thrived, is now facing a daunting reality that has been unfolding since 2022. Factory closures, mass layoffs, and declining production capacity are just a few of the challenges being faced.
The situation is not new, but it seems to be worsening, with several companies managing to bounce back only to face further difficulties later on. Redma Gita Wirawasta, the Chairperson of the Filament Yarn Producers Association (APSyFI), has revealed that the Indonesian TPT industry is currently on the third stage of deindustrialization.
Understanding Deindustrialization
Deindustrialization, in essence, refers to a process where the proportion of the workforce employed in the manufacturing sector declines, often due to job loss and factory closures. This trend can lead to decreased productivity, reduced economic output, and mounting social issues.
The Indonesian TPT industry started experiencing deindustrialization in 2001 due to the Asian financial crisis. Then, between 2012 and 2014, the Free Trade Agreement (FTA) with China further escalated the situation. The Covid-19 pandemic, geopolitical tensions, and oversupply from China are the latest factors exacerbating the issue, according to Redma.
The Impact of Deindustrialization in Numbers
Edy Priyono, Deputy III of the Presidential Staff Office (KSP), acknowledges the deindustrialization phenomena during a seminar in 2024. He points out that the growth of the manufacturing industry has consistently lagged behind the overall economy during the past decade, resulting in a gradual decline in the sector’s contribution to the GDP, from 21.36% in 2014 to just 18.67% in 2023.
Redma shared that since 2022, around 1 million jobs have been cut in the Indonesian TPT industry, with approximately 50% of these being from the garment sector. This job loss is attributed to a slowdown in global economic growth, decreased export demand, and the influx of illicit and legal imported TPT products, squeezing local market share.
A Sobering List of Struggles
Since the second quarter of 2022, around 30 textile companies have either shut down or suspended operations, leading to over 11,000 job losses. The ripple effect of these closures has reached even further up the supply chain, with many spinning, weaving, and dying factories also facing hardship.
New Hope or Despair?
As the industry grapples with the realities of deindustrialization, Benny Soetrisno, the Chairman of the Indonesian Exporters and Importers Association (GPEI), has suggested three strategic moves to prevent the further collapse of the textile industry in Indonesia. He believes that the influx of cheap imports, both legal and illegal, from China is the main culprit.
Meanwhile, the Confederation of Indonesian Trade Unions (KSPN) reported that, from January to September 2024, around 15,000 textile industry workers had been laid off, tracking losses from the downstream to upstream sectors.
A Race Against Time
To avoid the complete extinction of Indonesia’s textile industry, stakeholders must urgently address the challenges at hand. This may involve revisiting trade agreements, strengthening regulations against illicit imports, and fostering a more supportive infrastructure for the industry’s growth and resilience.
Failure to do so could turn the question mark appended to the headline of this article into a stark reality – ‘Indonesia’s Textile Industry: On the Brink of Extinction?**
This article is for informational purposes only and does not constitute expert advice. For up-to-date news and insights, please refer to CNBC Indonesia.
