Indonesia’s government is preparing a high-stakes intervention to revive a struggling textile and garment base. Under a plan linked to Danantara, Indonesia’s sovereign wealth fund, the new state-owned enterprise (SOE) would receive up to USD 6 billion to develop new technology and expand exports. Supporters frame it as an economic and social imperative because textiles are described as a critical employer, with one source citing over six million workers. The move comes as the industry faces external and internal strains at once, including a proposed 19% U.S. tariff on select Indonesian textile products and domestic producers being undercut by cheaper foreign rivals.
Signals of stress have been visible in sentiment and competitiveness. One assessment cited the textile sub-sector’s industrial confidence index at 49.74% in October 2025, interpreting that level as a decline in performance. Fortune also described a long slide, arguing the sector was in slow decline even before the tariff threat. It pointed to rising labor and energy costs and said Indonesian wages in the textile industry are around double that of Bangladesh, citing the International Labor Organization. A dramatic example arrived in February 2025, when textile giant Sritex collapsed after racking up over USD 1.6 billion in debt.
What the SOE Is Supposed to Fix—and What Could Go Wrong
The SOE’s logic is to build a national champion able to navigate the tariff environment and global trade-war pressures while countering a surge of cheap imports, including from China. Export exposure raises the stakes: one report said only a third of Indonesia’s garments are sold domestically, with the rest exported to the U.S., the Middle East, Europe, and China. The Indonesian Garment and Textile Association put national textile and garment exports at USD 11.9 billion in 2024, while another market report described the industry as generating over USD 13 billion in annual exports. The government’s value proposition depends on how durable the trade environment is, because any shift in U.S. policy could change the competitive calculus for exporters.
Critics argue that a new “Goliath” could amplify, not relieve, the Indonesia textile industry crisis if it competes directly with private firms. Fortune quoted concerns that the SOE could become a dominant rival rather than a market anchor, leaving some firms competing with a well-capitalized state-backed player. Another warning is that, without careful management, intensified price competition could hurt workers through cost-cutting and could weaken local SMEs that cannot match SOE scale. Asia Times also criticized the concept of creating a new entity that “hunts in the same market,” while describing an ambition to lift textile export earnings from about USD 4 billion to USD 40 billion within a decade.
Even amid the turbulence, market indicators show why policymakers see room for a turnaround if investment is targeted well. Market.us estimated Indonesia’s textiles market at USD 39.3 billion in 2025, with a forecast of USD 54.9 billion by 2035 at a 3.4% CAGR, while Mordor Intelligence projected growth from USD 40.65 billion in 2025 to USD 47.36 billion by 2031 at a 2.79% CAGR. Market.us also cited ARC Group data showing Q1 2024 foreign demand by volume rose 7.34% year-on-year, and apparel export volumes rose 3.08% year-on-year. The policy question is whether a state-backed champion can channel funding into modernization and resilience without crowding out private investment or turning industry consolidation into a new risk.
What is the government’s plan to address the Indonesia textile industry crisis?
How big are Indonesia’s textile and garment exports, according to the sources?
What evidence suggests the textile sector is under strain?
Why do critics worry about a new state-backed textile champion?
What market growth outlooks are cited for Indonesia’s textiles market?
