Indonesia’s textile sector is under severe strain from a surge of imported goods in the home market, leaving utilisation of installed capacity at mills at roughly 50%, undermining business continuity and eroding the competitiveness of local producers.
Redma Gita Wirawasta, Chairman of the Indonesian Fiber & Filament Yarn Producers Association (APSyFI), said the weak utilisation stems from uncontrolled circulation of imported products, which has deepened the domestic market’s reliance on foreign supply.
According to Redma, local manufacturers are competing on unequal terms against imports suspected of being dumped, that is, sold below a fair price. Domestic players are consequently obliged to cut selling prices beneath production cost to hold on to market share.
He offered an illustration: where production costs stand at 100, dumped imports can land at 80, making profit elusive for local makers, who have suffered repeated losses for years.
Speaking at the Bisnis Indonesia Forum (BIF) he asked how long a producer can keep selling at 80 when costs are 100. This has gone on for years, he said, machines are too old to replace and mills eventually have to close, and closures would erode national output.
Sustained price pressure leaves firms with limited funds to modernise machinery and expand capacity. Over time, factories may be forced to scale back operations or shut altogether, and such closures in turn drag down utilisation across the national industry.
Redma also drew attention to import liberalisation, which he argued has not been accompanied by adequate scrutiny of finished-product imports.
The government has eased imports on the grounds of smoothing raw material supply to industry, but he warned the approach may open the door to goods competing head-on with local output.
A particular APSyFI concern is the loosening of import rules in bonded zones, which exist chiefly to support export-oriented production.
Further relaxation without strict supervision, Redma said, could widen the flow of textile products into the domestic market and intensify pressure on national producers.
He added that import relaxation keeps recurring, framed by officials as facilitating raw material imports, and that this is exactly what threatens to destroy the industry’s integrated structure.
In his view, stronger anti-dumping policies and trade safeguards are vital to shield domestic industry from unfair competition. Absent effective protection, the national textile chain risks further weakening, from upstream fibre and yarn through to downstream garment production.
The matter is increasingly urgent because the industry’s stages are closely interlinked. A weaker upstream could disrupt supply and threaten the sustainability of downstream firms, while falling downstream output could reduce demand for raw materials made at home.
Against this backdrop, the government has begun treating textiles as a sector deserving special attention. President Prabowo Subianto even plans to set up a new state-owned enterprise (SOE) to develop the national textile industry in an integrated way.
Downstream, the government is also keeping an eye on imported clothing entering through various channels, seen as damaging to local garment makers. The President has instructed the Directorate General of Customs and Excise to regulate these channels to stop non-compliant goods from entering.
These steps form part of official efforts to improve the state of the national textile industry. For businesses, however, the main challenge lies beyond easy access to raw materials: market certainty, enforcement of trade rules and protection of locally made products matter just as much.
With utilisation still hovering near 50%, the industry needs policies that balance smooth raw material supply with control over finished-goods imports.
Without better oversight and stronger trade instruments, price pressure and the threat of closures are expected to persist, holding back recovery and the integrated development of the national textile industry.
Image courtesy: Aditya Birla Yarn
