FILE PHOTO: Workers produce military uniforms at a factory of PT Sri Rezeki Isman (Sritex) in Sukoharjo, Central Java, in October 2016. - JP/ANN
JAKARTA: The government’s plan to set up a new state-owned textile firm has raised questions among business representatives over how it might help the industry, with warnings that heavy-handed intervention risks weakening private investment and job creation in one of the country’s most laboUr-intensive sectors.
Redma Gita Wirawasta, chairman of the Indonesian Fiber and Filament Yarn Producers Association, said on Tuesday (Jan 20) that industry players were awaiting details on the announced deployment of US$6 billion, particularly following government signals that the proposed state-owned enterprise (SOE) would focus on aiding bankrupt textile firm PT Sri Rejeki Isman, better known as Sritex.
“A state-owned company is one possible option, but we want to stress that improving the business climate […] is just as important,” Redma told The Jakarta Post, pointing to trade policy, competitiveness incentives and licensing transparency.
“Saving Sritex would cost at least Rp 8 trillion [US$472 million], so there should also be room for incentives for private players. The US$6 billion could instead be used to spur up to US$60 billion in private investment.”
Sritex, once one of South-East Asia’s largest integrated textile manufacturers, officially ceased operations in March 2025 following its bankruptcy declaration in October 2024.
The shutdown led to the layoff of more than 10,000 workers in January and February 2025. In response, President Prabowo Subianto instructed several ministers to devise solutions to help re-employ the affected workers, including leasing factory machinery, attracting investors to acquire the company or facilitating their absorption into other companies.
State Secretary Prasetyo Hadi said on Monday that the proposed textile SOE would be tasked with “addressing problems in the garment and textile sector”, including the Sritex bankruptcy.
The plan followed Prabowo’s directive to fund a textile SOE with US$6 billion in capital to be provided by state asset fund Danantara, which was announced after a closed-door meeting at the President’s Hambalang residence in West Java on Jan. 11.
“Sritex must be saved in the sense that its economic activities continue, because it employs around 10,000 workers and generates significant economic activity,” Prasetyo told reporters on Monday, adding that the government was open to providing broader incentives for the textile sector if needed.
Prasetyo said he hoped the process “would be completed soon” to avoid disrupting economic activity in the textile sector.
Industry Minister Agus Gumiwang Kartasasmita said the government wanted to avoid liquidating Sritex and signalled a preference for a rescue under a new ownership structure.
“It would be unfortunate if Sritex were liquidated. If it could be saved through a different ownership concept, that would be better,” Agus told reporters on Tuesday.
“Under the President’s directive, we are preparing the fund to fill gaps across the textile and garment supply chain, from upstream and intermediate segments through to downstream,” he added, declining to spell out a road map for the effort.
Coordinating Economy Minister Airlangga Hartarto previously said Prabowo had pledged to provide the funding “to ensure technology remains competitive and investment continues” in the textile sector, calling it the country’s “defensive response” to the risk of higher global trade tariffs.
The creation of a textile SOE was also part of a broader road map aimed at lifting annual textile exports from current levels to US$40 billion over the next decade, he added. The textile and garment sector generated around $11.9 billion in export revenue in 2024, making it one of the country’s largest non-oil and gas export industries, according to industry data.
The United States is Indonesia’s largest export market for textile and garment products, which remain subject to steep US import tariffs imposed by US President Donald Trump last year. Unless Jakarta negotiates an exemption for garments, Indonesian products will become less competitive in the American market.
Indonesian Employers Association (Apindo) chairwoman Shinta Kamdani said on Tuesday that the plan to create a textile SOE needed to be assessed carefully and involve industry players across the value chain.
She warned that excessive state involvement as a direct market player could crowd out private investment. The textile industry is highly competitive, efficiency-driven and structurally disadvantaged, while SOEs enjoy structural advantages, such as cheaper capital and policy preferences, “without proper partnership design, this risks distorting the market and weakening private investment incentives,” Shinta told the Post.
The funding, she emphasised, would be better deployed as an industrial policy tool to strengthen the sector’s overall competitiveness.
Moreover, “Danantara should function as a collaboration and co-investment platform, while ensuring a level playing field between state-owned and private companies,” Shinta said.
Economist Wijayanto Samirin of Paramadina University questioned why the government appeared solely focused on rescuing Sritex, while other textile industry players also required support.
Speaking to the Post on Tuesday, he warned that excessive state intervention could undermine job creation and economic growth, adding that the government should avoid directly entering sectors where private firms could operate more efficiently.
“Six billion dollars is a huge amount of money,” he said. “Companies that are still operating but need operational strengthening and investment should receive attention, even priority, and the cost would be lower with potentially much greater impact.”
The textile and garment industry employs around 3.96 million workers, accounting for roughly 20 per cent of the total manufacturing workforce, and accounted for 0.97 per cent of the country’s gross domestic product from January through September 2025, according to data from the Industry Ministry. - The Jakarta Post/ANN
