Celvin Moniaga Sipahutar, Jakarta – The government has announced a series of new policies aimed at protecting and revitalizing labor-intensive industries, including textiles, footwear, furniture, food, and beverages, in response to widespread factory closures and mass layoffs.
The move comes amid declining orders, rising production costs, and weakened competitiveness, which have forced numerous companies to shut down. One of the most notable cases is the recent bankruptcy of Sritex, Indonesia's oldest textile company, which resulted in more than 10,000 job losses in Central Java.
Chief Economic Minister Airlangga Hartarto revealed on Wednesday that the government will introduce financial incentives, anti-dumping measures, and deregulation to support struggling industries. As part of these efforts, Rp 20 trillion ($1.2 billion) has been allocated to help small and medium enterprises invest in new machinery.
"The government has formulated a stimulus package for machinery revitalization, allocating Rp 20 trillion in investment subsidies," Airlangga said during a press conference following a meeting with President Prabowo Subianto at the State Palace in Jakarta. The meeting, also attended by representatives of the National Economic Council (DEN), focused on economic recovery strategies.
Under the new policy, industries such as textiles, footwear, food, beverages, furniture, and leather will be prioritized for subsidized loans, offering a 5 percent interest subsidy over an eight-year period.
"Without upgraded machinery, these industries cannot compete in terms of output, energy efficiency, and production speed," Airlangga explained.
Textile industry
Labor-intensive sectors play a crucial role in Indonesia's economy, both in job creation and export revenues. The textile industry alone employs over four million people and generates more than $2 billion in exports annually.
To enhance competitiveness, the government will streamline regulations related to raw material procurement, import procedures, tariff structures, and supply chain management.
In addition, Indonesia is pushing for the swift ratification of the Comprehensive Economic Partnership Agreement (CEPA) with the European Union, which is expected to open new markets for labor-intensive industries.
"The European Union is the world's largest textile market, accounting for 30 percent of global demand. If we finalize the agreement, our textile exports could increase by 50 percent, as we have already seen in Vietnam," Airlangga noted.