Indonesia's textile and garment industry, which employs roughly 4 million workers and generated about US$12 billion in export value, sits at the centre of a new presidential directive aimed at overhauling tariffs, raw-material imports and labour rules across the full upstream-to-downstream chain, Coordinating Minister for Economic Affairs Airlangga Hartarto said on September 22.

Speaking to reporters at the Presidential Palace Complex in Jakarta after a limited cabinet meeting (ratas), Airlangga framed the instructions as a competitiveness package for a sector that contributes approximately 0.97 percent of national gross domestic product and spans fibre and yarn production, intermediate fabrics and finished garments.

"President Prabowo wants textile exports to be further improved," Airlangga said, adding that line ministries had been tasked with converting the directives into binding regulation.

What did the meeting decide on trade?

The most concrete trade-policy items focus on three tracks. First, tariff harmonisation from upstream to downstream so duty differentials no longer skew inputs against local mills. Second, enforcement action against imports that undercut domestic producers. Third, a review of Pertek — the technical-approval pathway that currently governs movement of industrial raw materials — to ease supply bottlenecks for spinning, weaving and cut-and-sew operations.

Where does PKWT fit?

Workforce structure came next. The president asked relevant ministries to settle the correct Value Added Tax treatment for workers hired under the Fixed Time Work Agreement (PKWT), the contract form Indonesian mills use to flex headcount around seasonal order cycles. Officials will also evaluate VAT for export-oriented textile and garment producers — a recurring complaint from manufacturers competing against lower-tariff origins in Vietnam, Bangladesh and China.

Where does Danantara fit?

For financially distressed textile companies, the president directed state investment vehicle Danantara to "immediately actively" support restructuring, signalling that balance-sheet repair now sits inside the textile agenda rather than as a separate corporate matter. The move places Danantara alongside ministries as a restructuring counterparty for mills facing working-capital pressure.

What is the supply-chain scope?

The sector under review covers:

• Upstream fibre, filament and yarn
• Intermediate greige and finished fabrics
• Downstream apparel, technical textiles and finished goods

The 0.97 percent GDP contribution positions textiles behind palm oil and footwear but ahead of several light-manufacturing categories in Indonesia's national accounts, while the $12 billion export figure ranks the sector among the country's top-five non-mining earners.

Compliance items now in motion

• Pertek technical-approval review for industrial raw-material imports
• Tariff-line harmonisation across upstream, intermediate and downstream TPT tiers
• VAT assessment for PKWT contract labour
• VAT review for export-oriented textile and garment producers
• Danantara-led restructuring workstreams for distressed mills
• Import-enforcement action against goods deemed to disrupt domestic industry sustainability

What does this force for sourcing?

The directives will land first with Indonesian mills and garment exporters serving US and EU buyers, who must now track tariff-line changes, raw-material import timelines and shifts in PKWT cost structures before adjusting sourcing schedules for the next seasonal cut. Buyers accustomed to Indonesia for fast-fashion and technical-textile volume will need to confirm with suppliers whether Pertek review accelerates fibre deliveries or simply confirms existing access. Compliance teams should expect revised VAT invoices on contract labour by the next quarterly filing cycle, while mills in restructuring talks will see Danantara enter board-level discussions. Until ministries publish the implementing regulations, sourcing managers should treat the September 22 package as policy direction rather than settled trade defence — but build contingency for either faster raw-material clearance or tighter import surveillance depending on which lane the government opens first.