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Indonesia’s Industrial Sector Gears Up for Revitalization Amid Economic Concerns
Jakarta, Indonesia – Amid growing worries about de-industrialization, The House Of Representatives (Dpr) is aggressively pushing forward with legislative measures aimed at breathing new life into Indonesia’s crucial industrial sector.This initiative arises following consecutive monthly contractions in the Manufacturing Purchasing Managers’ Index (Pmi), which, despite a slight uptick from 46.7 in April to 47.4 in May, still indicates a significant slowdown in industrial activities.
Can these legislative changes truly turn the tide for Indonesia’s industrial output?
Legislative body Fast-Tracks Key Bills
The Dpr’s Legislative Body (Baleg) has prioritized several bills from the 2025 Priority National Legislation Program (Prolegnas Prioritas), expediting their progress. These include the long-awaited Draft Law On Textiles (Ruu Pertekstilan), revisions to the 2014 Industry Law (Law No. 3/2014), and preliminary discussions to modernize the Bankruptcy Law (Law No. 37/2004).
Textile Bill Takes Center Stage
The textile bill has achieved the most tangible advancements.By may’s end, Baleg engaged in consultations with pivotal stakeholder associations, such as the Association Of Textile Experts (Ikatsi), the Indonesian Textile Association (Api), the Association Of Synthetic Fiber And Filament Yarn Producers (Apsyfi), and the Association Of batik Artisans And Batik Entrepreneurs Of Indonesia (Appbi).
Did You Know? Batik, a customary Indonesian wax-resist dyeing technique, was declared a Masterpiece of Oral and Intangible Heritage of Humanity by UNESCO in 2009.
Addressing Declining Competitiveness
A crucial point in the draft’s academic review, last updated in August 2024, is the declining competitiveness of the domestic textile industry, especially when compared to low-cost imports from China. Free trade agreements limit the government’s ability to raise tariffs or impose quotas without violating these agreements. The industry is also grappling with stagnation. The government seeks alternative solutions to bolster local manufacturers and enhance domestic competitive strength within the sector.
Harmonizing Regulations
regulatory fragmentation poses another substantial hurdle.Baleg reports that textile regulations are scattered across 19 ministries and agencies,hindering cohesive policymaking. The proposed textile law seeks to consolidate these regulations and establish a new governing institution,possibly under an existing ministry or reporting directly to the president.
Industry Law revision Gaining Momentum
Progress on revising the Industry Law is proceeding, albeit at a more measured pace.Industry Minister Agus Gumiwang Kartasasmita has conceded that the current law restricts the ministry’s direct support for industrial growth, necessitating revisions. He emphasized that revisions are vital to align Indonesia with global standards, where industrial firms are expected to embrace advanced technologies like artificial intelligence and commit to carbon neutrality. Such changes could entail significant operational restructuring, particularly for labor-intensive sectors like textiles.
The Industry Minister envisions that the revision will integrate with the government’s broader industrial roadmap, aiming to modernize the sector while enhancing sustainability. This aspect is particularly relevant for labor-intensive industries like textiles, which currently need a technological boost and better environmental compliance to attract international investors.