Bambang Pamungkas
Jakarta, May 7, 2026 – The perception of Indonesia’s textile and textile product (TPT) and footwear industries as "sunset industries," largely due to the pervasive influx of cheap imported goods, has prompted a decisive intervention from the government. Minister of Finance Purbaya Yudhi Sadewa announced a new, targeted initiative aimed at providing affordable credit, specifically for machine rejuvenation, to export-oriented businesses within these crucial sectors. This move is designed to inject much-needed capital and confidence into industries that have historically struggled to secure financing from conventional banking institutions.
Minister Sadewa highlighted the critical challenge faced by these industries: "Because it’s considered a sunset industry, it’s very difficult for them to get loans from banks," he stated in Kebon Sirih, Jakarta. This difficulty extends even to financing essential upgrades like machinery modernization, a vital step for any industry seeking to remain competitive in a rapidly evolving global market. The government’s new policy seeks to directly address this systemic funding gap by leveraging the capabilities of the Indonesia Eximbank (Lembaga Pembiayaan Ekspor Indonesia, LPEI).
The subsidized credit program, which Minister Sadewa affirmed would be spearheaded by LPEI, is slated for swift implementation. The specific sectors and beneficiaries will be meticulously coordinated with the Ministry of Industry to ensure strategic alignment and maximize impact. "That’s why I utilized LPEI; we have already met with textile companies and associations, and we will implement this in the not-too-distant future," he elaborated, signaling the advanced stage of preparations. The Minister further indicated that the interest rate for this special credit facility would be significantly lower than market rates, potentially around 6% from LPEI, with a willingness to reduce it further if deemed necessary to support the industries effectively.
The Genesis of the "Sunset Industry" Label
The "sunset industry" moniker applied to Indonesia’s TPT and footwear sectors is not new, nor is it without foundation in recent history. For years, these industries have grappled with a confluence of challenges that have eroded their domestic market share and international competitiveness. The most prominent factor has been the overwhelming tide of inexpensive imported goods, particularly from countries with lower production costs or more advanced manufacturing capabilities. These imports, often of comparable quality but significantly lower price, have saturated the Indonesian market, making it exceedingly difficult for local producers to compete on price.
Beyond import competition, other contributing factors include rising labor costs in Indonesia compared to regional rivals, high energy prices, and, crucially, an aging machinery fleet. Many Indonesian textile and footwear factories operate with equipment that is decades old, leading to lower efficiency, higher production costs, and reduced product quality compared to facilities in countries that have heavily invested in modernization. This technological lag limits their ability to innovate, produce diverse products, and meet stringent international standards, thus hindering their export potential.
The perception of decline has made traditional commercial banks hesitant to lend to these sectors. Financial institutions typically assess risk based on past performance, current market conditions, and future outlook. When an industry is perceived as stagnant or declining, it automatically falls into a higher-risk category, leading to higher interest rates, stricter collateral requirements, or outright loan rejections. This creates a vicious cycle: without access to capital, companies cannot modernize, and without modernization, they cannot improve competitiveness, perpetuating the "sunset" label.
The Crucial Role of Machine Rejuvenation
Modern machinery is not merely an upgrade; it is a fundamental requirement for survival and growth in the contemporary manufacturing landscape. For the textile industry, new machines offer significantly improved efficiency, reducing waste and energy consumption. They enable faster production cycles, critical for responding to fast-changing fashion trends. Furthermore, modern equipment allows for the production of higher-quality fabrics and garments, incorporating advanced materials and intricate designs that appeal to international markets. For the footwear industry, automation and advanced manufacturing techniques lead to greater precision, durability, and ergonomic design, enhancing product value.
The Minister’s focus on machine rejuvenation directly addresses this core need. By providing access to affordable credit for capital expenditure, the government aims to empower companies to invest in cutting-edge technology, thereby enhancing their productivity, reducing operational costs, and ultimately boosting their ability to compete both domestically and globally. This investment is also seen as a pathway towards adopting Industry 4.0 principles, integrating automation, data exchange, and smart manufacturing processes to create more agile and responsive production systems.
Selection Criteria and Broader Economic Implications
Minister Sadewa emphasized that the credit facility would not be a blanket handout. Instead, it would be strategically targeted at companies demonstrating viable business prospects and a clear path to future growth. "One of the indicators for textile and footwear industries to get cheap credit for machine rejuvenation is that they still have promising business prospects. If they have been under pressure for a long time, we will not give them cheap credit," he clarified. This selectivity aims to ensure that public funds are utilized effectively, supporting businesses with the highest potential for contributing to national exports and economic growth. The coordination with the Ministry of Industry will likely play a key role in identifying these promising entities, potentially based on export performance, market diversification strategies, and commitment to technological adoption.
The implications of this policy extend far beyond the immediate beneficiaries. Revitalizing the TPT and footwear industries can have a cascading positive effect on the Indonesian economy. These sectors are significant employers, particularly for semi-skilled labor. A strong, growing industry means job creation and preservation, contributing to income stability and poverty reduction. In 2023, the textile and garment industry contributed approximately 6.2% to Indonesia’s non-oil and gas manufacturing GDP, employing over 3 million people directly and indirectly. The footwear sector similarly plays a vital role, with Indonesia being one of the top global footwear exporters.
By enhancing export capabilities, the initiative can contribute to strengthening Indonesia’s trade balance and increasing foreign exchange earnings. It also signals a broader commitment from the government to support manufacturing, which is a cornerstone of sustainable economic development. This aligns with national industrial strategies such as "Making Indonesia 4.0," which prioritizes the modernization of key manufacturing sectors to boost competitiveness and integrate them into global value chains.
Statements and Inferred Reactions from Related Parties
While the original article does not provide direct quotes from other stakeholders, their reactions can be logically inferred based on their roles and past advocacy:
- Indonesian Textile Association (API) and Indonesian Footwear Association (APRISINDO): Industry associations would undoubtedly welcome this policy with significant optimism. For years, they have been vocal advocates for government support, particularly concerning capital access and combating illegal imports. They would likely praise the Minister’s understanding of their financial challenges and the direct approach to machine rejuvenation. However, they might also express concerns regarding the practical implementation, criteria for "promising prospects," and the speed of disbursement, urging for a streamlined and transparent process to ensure equitable access for eligible members. They would likely reiterate the need for continued support in other areas, such as energy cost efficiency, labor policy, and more stringent measures against illegal imports.
- Lembaga Pembiayaan Ekspor Indonesia (LPEI) / Indonesia Eximbank: LPEI officials would likely express their readiness and commitment to executing the program. As a specialized financial institution focused on export financing, this initiative aligns perfectly with their mandate. They would emphasize their capacity to assess export potential and structure appropriate financial packages. They might detail their internal processes for evaluating loan applications, risk mitigation strategies, and collaboration mechanisms with the Ministry of Industry. Their statements would underscore their role in supporting national export goals and economic diversification.
- Ministry of Industry: The Ministry of Industry would likely emphasize its collaborative role in identifying strategic sectors and companies. They would highlight how this credit scheme complements their existing industrial development programs, including those promoting technology adoption and sustainable manufacturing practices. Their focus would be on ensuring that the selected beneficiaries contribute to the overall industrial roadmap, fostering a resilient and competitive manufacturing base that is capable of adapting to future market demands and technological shifts.
- Economists and Financial Analysts: Experts might offer a mixed but generally positive assessment. They would commend the government for addressing a critical market failure—the inability of viable industries to access financing due to perception. They would highlight the potential for improved productivity, export growth, and job creation. However, analysts might also caution about the risks associated with state-directed credit, such as potential moral hazard if selection criteria are not rigorously applied, or the risk of distorting market dynamics. They would emphasize the need for robust governance, clear performance metrics, and a sunset clause for the subsidized rates to prevent long-term dependency and ensure market efficiency. They might also stress that financial support alone is not a panacea and must be coupled with structural reforms, human capital development, and an improved regulatory environment.
Timeline and Future Outlook
The Minister’s statement on May 7, 2026, indicating that the program would commence "in the not-too-distant future," suggests that the preliminary discussions and framework development are largely complete. The meeting with textile companies and associations implies that the government has already gathered direct input from the industry, refining the policy to meet actual needs.
The immediate next steps would involve LPEI and the Ministry of Industry finalizing the detailed operational guidelines, application procedures, and criteria for identifying "promising" businesses. This phase is crucial for ensuring transparency and efficiency in fund allocation. Industry players would then be expected to submit their proposals for machine rejuvenation, outlining their business plans, export targets, and the specific technologies they intend to adopt.
Looking ahead, the success of this initiative will be measured not only by the volume of credit disbursed but, more importantly, by its tangible impact on the competitiveness and export performance of the textile and footwear sectors. A significant increase in export values, diversification into higher-value products, and a visible shift towards more modern and sustainable manufacturing practices would be key indicators of success. Furthermore, a reduction in the reliance on imported cheap goods within the domestic market would signify a strengthened local industry.
This strategic intervention by the Indonesian government underscores a renewed commitment to its manufacturing base. By directly tackling the financial barriers and negative perceptions, Minister Purbaya Yudhi Sadewa’s initiative offers a vital lifeline to the textile and footwear industries, aiming to transform them from perceived "sunset industries" into vibrant, export-driven engines of economic growth. The coming months will reveal the effectiveness of this policy in reshaping Indonesia’s industrial landscape and securing a brighter future for these foundational sectors.
