Indonesia plans to build new state-owned enterprises State-owned enterprises (SOEs) aim to revive the ailing textile and apparel industry and insulate it from US President Donald Trump’s tariffs.
Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartato announced the decision on January 14, placing the state-owned enterprise Danantara, Indonesia’s sovereign wealth fund, This will inject up to $6 billion into the company to develop new technologies and expand exports.
Indonesia’s textile industry is already challenged by growing regional competition from areas such as China and Bangladesh, and the U.S. proposal to impose a 19% tariff on Indonesian textile exports could make the situation worse. The new state-owned enterprises are designed to protect the industry from a recent surge in cheap Chinese imports and other external geopolitical pressures.
But not all Indonesians are Cheers for new government undertakingsSome experts worry it could weaken private investment and stifle job creation.
“SOEs may end up becoming dominant competitors rather than market pillars,” said Siwage Dharma Negara, co-coordinator of the Indonesian studies program at Singapore’s Yusof Issa Institute of Southeast Asian Studies. wealth. Some companies may “find themselves competing against a well-capitalized, state-backed enterprise.”
Danantara was originally established in February 2025 by Indonesian President Prabowo Subianto, hoping to deliver on a lofty campaign promise of 8% annual economic growth by the end of his term in 2029. Rather than being a more passive investor, Danantara directly manages state-owned enterprises.
Indonesia’s textile industry
Indonesia has a rich cultural heritage of traditional fabrics, e.g. batik, tie and sunjit, They are characterized by intricate patterns, often printed with natural dyes derived from plants and minerals.
Textiles are also a cornerstone of the Indonesian economy. Only one-third of Indonesia’s clothing is sold domestically, with the rest exported to the United States, the Middle East, Europe and China. The National Bureau of Statistics predicts that national textile and apparel exports will reach US$11.9 billion in 2024 Indonesian Clothing and Textile Association.
Even before the United States imposed tariffs on Indonesian garment exports, Indonesia’s textile industry was already in slow decline. Rising labor and energy costs have weakened Indonesia’s competitiveness against regional rivals such as Bangladesh, Vietnam and India. In the textile industry, wages in Indonesia are about twice those in Bangladesh, according to the International Labor Organization.
In February 2025, Indonesian textile giant Stritex collapsed after debts exceeded US$1.6 billion. Exceed 10,000 workers Lost job. “At its peak, Stritex produced military uniforms for more than 30 countries, including the United States and NATO members,” explains Rita Padawangi, associate professor of sociology at the Singapore University of Social Sciences (SUSS). She calls its importance to Indonesia’s textile manufacturing movement “undeniable.”
New horizons or missed opportunity?
Given the downturn in the textile industry, some experts say Indonesia’s plan to establish a new state-owned enterprise has its merits.
“This decision reflects the government’s belief that the problem is structural and cannot be solved by the private sector alone,” said Negara of the Yusof Issa Institute of Southeast Asia, adding that the main advantage of state-owned enterprises is the financial and institutional capacity provided by their government sponsors. “Subsidies and tax incentives may provide short-term relief but will do little to address the underlying problems of low productivity, outdated technology and weak upstream integration.”
Rather than simply incorporating it into the annual budget, Dhanantara allows fiscal surpluses to be strategically and dynamically reinvested in fast-growing sectors. He added: “Dhanantara can mobilize significant funding, take a longer-term view and operate with investment-style oversight that is more flexible than the annual state budget process.”
But without careful management, state-owned enterprises could further intensify competition in an already overcrowded industry, driving down prices and potentially hurting workers. SUSS’s Padavanj warned that cost-cutting could put workers at risk of exploitation. Furthermore, it could undermine the competitiveness of local small and medium-sized enterprises – which drive innovation and form the backbone of the economy – as they are unable to take advantage of the economies of scale available to state-owned enterprises and large private companies.
“Indonesia’s textile industry has huge potential, especially for artisanal producers that blend tradition and modernity,” says Padawangi. “It would be a missed opportunity to talk about the textile industry only from the perspective of the big companies, without focusing on the work of traditional weavers and the small businesses that work with them.”