Jakarta. Indonesia must protect its textile industry from an influx of Chinese exports while continuing to attract investment and create jobs, National Economic Council (DEN) Chairman Luhut Binsar Pandjaitan said. Despite rising layoffs and global challenges, the sector remains a key economic driver, employing nearly 4 million workers and drawing significant foreign and domestic investment.

"Over the past year, Indonesia has emerged as a key relocation destination for textile and footwear manufacturing, driven by the US-China trade war and industry saturation in Vietnam," Luhut said during the Regional Leaders Retreat in Magelang on Wednesday.

This trend is reflected in the surge of foreign direct investment (FDI) into the sector, which reached $903 million in 2024—marking a 107 percent increase from the previous year.

Meanwhile, domestic investment in the industry stood at Rp 7 trillion ($448 million), creating employment opportunities. According to DEN, investments ranging from $20 million to $30 million in garment factories can generate up to 9,000 jobs.

During a recent DEN meeting with the Indonesian Footwear Association (Aprisindo) and global apparel brands such as Adidas and Nike, one international brand announced plans to triple its orders from Indonesia within three years. This expansion is expected to create an additional 100,000 jobs. 

Chief Economic Affairs Minister Airlangga Hartarto announced last November that 15 companies from Taiwan plan to relocate their operations to Indonesia.

However, Luhut acknowledged that challenges remain, including land acquisition, environmental permit approvals, and wage policies. He also emphasized the need to protect the domestic market from illegal imports.

“China’s overproduction due to US tariffs has led them to redirect exports to developing nations, including Indonesia. This needs to be closely monitored. At the same time, we must ensure that raw material imports for production are not disrupted,” Luhut said.

Beyond textiles and footwear, DEN is also exploring Indonesia’s potential role in the global semiconductor supply chain.

Surge in Layoffs and Factory Closures

Despite the industry's investment growth, layoffs continue to rise. The Indonesian Filament Yarn and Fiber Producers Association (Apsyfi) reported that around 30 textile factories shut down between January and May 2024, resulting in 10,800 job losses—up from 7,200 layoffs in Bandung and Surakarta in 2023.

The Manpower Ministry warned that job cuts in the textile sector could surge, with layoffs potentially increasing from 80,000 in 2024 to 280,000 workers, according to Deputy Minister Immanuel Ebenezer Gerungan. He added that 60 textile companies are planning layoffs that could affect up to 200,000 employees.

Sri Rejeki Isman (Sritex), Indonesia’s largest textile company, recently furloughed 3,000 employees following the Supreme Court’s rejection of its bankruptcy appeal. The financially troubled company owes approximately Rp 14.42 trillion ($891.7 million) to 27 banks and Rp 220 billion to three financing firms.

The think tank Celios attributed the job losses to the influx of cheaper Chinese textile imports, which have undercut local production.