Indonesia moves to revitalize textile industry through tax incentives and credit

President Prabowo Subianto is spearheading efforts to strengthen Indonesia’s textile and garment industry, a sector that contributes nearly 1% to the national GDP and employs approximately 4 million people. During a recent cabinet meeting, the President emphasized the need to revitalize this strategic sector, which has faced challenges such as aging machinery and competition from imports.

To support this, the government is considering various fiscal and regulatory measures. These include potential tax holidays, tax allowances, and Value Added Tax (VAT) relief for textile manufacturers. Additionally, the Danantara agency has been tasked with restructuring the industry and encouraging state-owned banks (Himbara) to provide productive credit to help companies modernize their equipment.

Minister of Industry Agus Gumiwang Kartasasmita noted that while the manufacturing sector faces pressures from import surges, geopolitical tensions, and rising oil prices, labor-intensive industries are showing signs of recovery. In the second quarter of 2026, sub-sectors such as furniture, footwear, and textiles recorded positive growth, signaling a rebound for the nation's manufacturing landscape.