Jakarta. The Institute for Development of Economics and Finance (Indef) has warned that the surge of illegally imported second-hand clothing is inflicting serious damage on the country’s labor-intensive textile sector, with more than half a million workers already affected.

The economic think tank estimates that roughly 520,000 textile workers have been laid off as factories lose market share to the booming underground trade in used garments. Speaking on Beritasatu TV on Friday, Indef economist Esther Sri Astuti said domestic producers, especially small and medium-scale manufacturers, are struggling to compete as cheap imported thrift items flood the market.

“Illegal used-clothes imports have eroded 15 percent of the market share of domestic textile producers. Many factories, especially SMEs, have been forced to cut labor because sales keep declining,” she said. Aside from the employment hit, Esther said the illegal pipeline also deprives the state of revenue, as the goods bypass tax collection entirely. The Indonesian Textile Association (API) estimates the economic loss at around Rp 1 trillion (US$59 million) per year.

The government now plans to take tougher action. Finance Minister Purbaya Yudhi Sadewa said authorities have identified key actors behind the smuggling networks and will impose administrative penalties alongside criminal prosecution. “We know who the players are. Anyone who has ever been involved in used-clothes smuggling will be blacklisted; they won’t be allowed to import goods again,” Purbaya said recently.

Smuggled second-hand clothing often ends up in local thrift markets, a booming retail trend among young Indonesians, but the practice remains illegal under Indonesian trade rules. Local industry groups argue the influx of ultra-cheap goods is accelerating the decline of an already weakened domestic textile sector, which has been squeezed by slowing demand and rising production costs.

Esther urged the government to reinforce port inspections and close regulatory loopholes to dismantle the supply chain. “If enforcement becomes truly effective, there won’t be any more illegal used-clothes imports,” she said.