IndonesiaMarket Insights

Textile & Clothing Manufacturing in Indonesia

By 22 October, 2022June 30th, 2023No Comments

Clothes factory in Indonesia


With robust economic growth and rising purchasing power, Indonesia becomes an attractive destination for the clothing and textile industry. Still, fierce competition from international companies poses both risks and opportunities in the market.

This article will introduce Indonesia’s textile and clothing manufacturing industry, describing insights such as why companies choose to source here and what are the benefits and disadvantages.

Indonesia’s textile industry

Indonesia is among the top 10 textile-producing countries in the world and the textile and textile product industry is among the most important industries for Indonesia’s economy, providing jobs to more than 3.7 million Indonesians. The textile industry accounted for 6.12% of the GDP of Indonesia’s manufacturing sector in 2021 or 1.04% of the total GDP. With a GDP of US$1.19 trillion in 2021, the industry reached a value of US$12.3 billion.

The majority of Indonesia’s total textile and garment production is to supply international demand, with 70% of the output being exported. Before Covid-19, Indonesia ranked number six in worldwide textile output, and exports were valued at US$13.8 billion in 2019, a significant increase from US$10 billion the year before. The industry was heavily affected by the Covid-19 pandemic; textile and textile product exports dropped by 52% in May 2020 compared to the year before. Nevertheless, strong support and focus from the Indonesian government have helped recover the industry. In the country’s development masterplan “Industry 4.0”, the government is aiming to propel Indonesia into the top five textile producers in the world by 2030; the export target for 2022 is set at a value of US$13-14 billion.

Contributing to the growth is also Indonesia’s shifted focus to new export markets, utilizing its connection with the Muslim countries. Several Muslim-majority countries now represent half of Indonesia’s trade missions and negotiations, and textile products are now hugely exported there.

As garment companies continue to shift production out of China, Indonesia serves as an attractive alternative. China’s position as a global cotton importer is dropping and most cotton exports are being redirected to competing countries, including Indonesia. The USDA predicts that China’s cotton imports will rise by only 3.5 million bales during 2021-2030, compared to the estimated 8.1 million bales for the leading competing garment countries, Indonesia, Vietnam, Pakistan, Bangladesh, and Turkey combined. In 2030, China is expected to account for 24% of total global imports while the combined competing countries are expected to account for 47%.

What textile products are manufactured in Indonesia

With decades worth of experience in manufacturing textiles and garments, Indonesia is able to cater to a wide range of manufacturing needs.


Indonesian manufacturers can produce a wide range of clothing, and many high fashion clothing brands have production in Indonesia due to its manufacturing plants ensuring high quality. Notable names such as Tommy Hilfiger and Calvin Klein have long put their trust in Indonesia’s fashion manufacturing.

As the minimum wage in Indonesia can vary across regions, many textile factories are now located in Central Java after minimum wages started to rise in West Java and Banten. Still, the majority of weaving and finishing factories remain centered in Bandung. Other fashion brands such as H&M and Uniqlo manufacture in the manufacturing hotspots of Bali, Java, and Sumatra.


Indonesia is the world’s 4th largest footwear producer and 3rd largest footwear exporter. Growing demand from emerging international markets as well as increased purchasing power amongst the domestic population provides a positive outlook for further growth for Indonesia’s footwear industry.

It is possible to manufacture many types of footwear in Indonesia of many materials.

Benefits of sourcing textiles & clothes in Indonesia

There are many benefits to manufacturing in Indonesia, many are attributed to a young and growing labor force, low labor costs, and a growing domestic market which are further detailed in our market insight Sourcing and Manufacturing in Indonesia: An introduction.

In addition, the textile and garment industry also benefits from the high support that the government is directing into the industry. Under the Industry 4.0 master plan, textile and garments are one of five targeted industries that Indonesia plans to put in extra effort to develop. Several key technologies are expected to boost the industry’s development, including AI, IoT, rapid data analysis, and sustainable practices. Furthermore, the government is carrying out a machine and equipment restructuring program specifically in the fabric refinement and fabric printing industries, as well as putting in additional efforts to improve the overall logistics and transport system in the country.

What are the disadvantages?

Like any other country, manufacturing in Indonesia also presents some disadvantages. This section presents some factors worth considering when choosing to manufacture textiles and garments here.

High dependency on imported raw material

Indonesia, like many other Southeast Asian countries, is highly dependent on imports of raw materials, in particular the garment sector. Around 18-30% of the sector’s production cost comes from imported inputs. At the same time, the government is aiming to boost the domestic market in general and reduce imports, applying higher tariffs and non-tariff barriers, which in this case also affects the imported inputs resulting in production becoming more expensive for domestic players.

Its high dependency on imported raw materials also makes the industry vulnerable to external constraints such as the depreciation of the Rupiah. Indonesia’s textile and garment industry imports around US$300 to US$600 million worth of cotton, which is bought in USD. Companies that cater to the domestic market are thus outcompeted by international exporting competitors who instead benefit from the stronger dollar and increased revenue.

High production costs

Despite Indonesia’s labor costs being the lowest in Southeast Asia, production costs are raised by additional factors. Electricity and gas prices in Indonesia are relatively high compared to other textile producing countries.

In addition, the machinery used in the textile and garment industry in Indonesia is aging and thus reducing productivity and efficiency. In 2019, it was estimated that 70% of machines used in the industry were old, some of which were over 3 decades old, and had a 50% less productivity rate. The government is providing substantial financial assistance to revitalize the technology used across the industry, which requires several million USD per year. Although the government is now carrying out restructuring programs, it will need some time before the equipment is up to par.

Additional disadvantages such as infrastructure, bureaucracy and red tape, and free trade- and bilateral agreements are further detailed here.

Trade and tariffs

Indonesia has signed and implemented a number of free trade agreements, both with countries and regions globally, as well as part of the region-wide Association of Southeast Asian Nations (ASEAN) Free Trade Area. In total, Indonesia is currently part of 14 trade agreements, mostly within the APAC region.

Indonesia is also in active discussion and negotiations to introduce trade agreements with India, Australia, Korea, and as part of RCEP. Discussions about an EU-Indonesia FTA have been going on since 2016 and have had 11 rounds ever since, with the last one being held in November 2021. A conclusion is yet to be made. Still, the EU is Indonesia’s fifth largest trade partner and the two regions have had a partnership under the Partnership and Cooperation Agreement since 2014. Indonesia is also part of the WTO and thus benefits from trade preferences where 30% of total imports from Indonesia enjoy lower duties.

Examples of import tariffs on textiles, apparel and footwear in Indonesia.

Table showing examples Indonesia's import tariffs

Sustainable clothing in Indonesia

In 2020, the government released its first sustainable development plan covering the period 2020-2024, aiming to lower greenhouse gas emissions. For the textile and garment industry, Indonesia is committed to reducing carbon and water consumption in the production process to reach its goals. In addition, the usage of environmentally friendly raw materials and applying circular economy principles are also highly encouraged in the market.

As part of reducing dependency on international imports and improving sustainability, Indonesia is looking at using locally produced raw materials, primarily focusing on viscose staple fibers, or artificial cotton fibers, which are natural and biodegradable. One of Asia’s biggest viscose-rayon producer, Indonesia based Asia Pacific Rayon, is leading the cellulose fiber industry in the country and is ensuring that all its rayon comes from renewable and biodegradable materials. With Indonesia being the largest rayon producer in the world, the growing global demand for the material is expected to transform the fashion industry towards a more sustainable future.

In addition, by keeping rayon production domestic, the demand for rayon will also help grow local fashion while at the same time reducing the country’s dependency on imported raw materials.


Indonesia’s textile and garment manufacturing industry has a strong history and market, holding an important position as a global supplier. With many notable fashion brands and international companies already invested in the country, it is now aiming to become part of the top five textile producers in the world by 2030.

Companies in the industry can benefit from the industry’s high-quality products, significant governmental support, and low labor cost. Still, outdated machinery and high dependency on imported raw materials result in less advantageous production costs.

Companies who seek to enter Indonesia’s textile and garment manufacturing industry will find promising growth opportunities in an already strong market.

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