State Textile Champion Planned as Indonesia Weighs $6 Billion Bet

JAKARTA, Investortrust.id — The Indonesian government plans to revive a state-owned textile enterprise on Thursday, Jan 15, 2026 in Jakarta as President Prabowo Subianto pushes to rebuild strategic manufacturing capacity, a move expected to reshape the troubled textile sector and test the state’s investment discipline.

Coordinating Minister for Economic Affairs Airlangga Hartarto said the government would allocate US$6 billion, equal to Rp 101 trillion, from Danantara to fund the plan, reviving a sector once anchored by state ownership but now weakened by imports and eroding competitiveness.

“Mr President reminded us that Indonesia once had a state-owned textile company, and this will be brought back, with US$6 billion in funding to be prepared by Danantara,” Airlangga said after meeting the president in South Jakarta on Wednesday, Jan 14, 2026.

He said the directive was part of a broader effort to strengthen domestic manufacturing, with textiles, garments, footwear, and electronics identified as priority industries under the administration’s industrial strategy.

According to Airlangga, the government had drawn up a long-term roadmap to rebuild competitiveness across the textile value chain while expanding access to overseas markets through free trade agreements.

“On these industries, the president asked us to define our defensive position, including how to find new markets, one of which is through the EU CEPA, which is expected to take effect in 2027,” he said.

The roadmap targets a tenfold increase in textile and apparel exports to US$40 billion over the next decade, from roughly US$4 billion currently, by deepening domestic value chains and reducing reliance on imported inputs.

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Repeating Failures

Yet the proposal has drawn skepticism from economists who argue that reviving a state-owned textile firm risks repeating past failures without addressing structural weaknesses.

Mohammad Faisal, executive director of the Center of Reform on Economics, said the plan did not tackle the core problems facing the industry, including weak investment incentives, outdated production capacity, and rampant illegal imports.

“The government should focus on fixing the problems faced by existing textile producers,” Faisal said. “That would be better than entering an arena where the private sector can actually play the main role.”

He warned that the creation of a new state enterprise could introduce fresh fiscal and operational risks without clear evidence of a strong link to industry recovery.

“I do not see a sufficiently strong correlation between solving the textile industry’s problems and establishing a state-owned textile company,” he said. “There are many risks that would have to be anticipated.”

Faisal urged the government instead to improve the investment climate and step up enforcement against illegal textile imports, which have undercut domestic producers for years.

“Fix the investment and business climate across sectors, including textiles, and address illegal textile imports, which urgently require enforcement,” he said.

Cautious Step Forward

Danantara, the state investment manager tasked with providing the funding, has taken a more cautious tone, stressing that no final decision has been made.

Rosan Perkasa Roeslani, Danantara’s chief executive, said the institution was still reviewing various options, including whether to establish a new company or inject capital into existing textile businesses. “We are still looking at the options,” Rosan said on Thursday, Jan 15, 2026, after presenting investment realization data at the Investment Ministry in Jakarta.

He said any investment would be subject to a feasibility study and assessed against Danantara’s criteria, including financial viability and job creation. “One of our key parameters is employment, as I have said before,” Rosan said.

He added that Danantara could accept returns below its usual benchmarks if a project delivered substantial employment gains and could be successfully turned around through restructuring.

“We look at the existing potential, as long as we are confident that the company can be turned around and restructured optimally, as we have done with other state-owned enterprises that needed comprehensive recovery,” he said.

The debate underscores the tension between the Prabowo administration’s ambition to reassert state leadership in strategic industries and concerns over whether state capital can effectively revive a sector battered by global competition, weak enforcement, and years of underinvestment.