The textile industry collapsed under the Jokowi era, the Soekarno-Suharto era

Jakarta, CNBC Indonesia – The climate in the textile and textile products (TPT) industry is experiencing a change in the current era. This led to many layoffs under President Joko Widodo's administration, but when President Soekarno and Soekarno took office, they tended to be successful and held a special place in the eyes of the government.

The dynamics of the textile industry during the Soekarno government era was very active. For President Soekarno himself, developing the national textile industry is a way of creating an independent economy, that is, standing on its own two feet.

Soekarno once felt annoyed by the growing number of imported textiles entering Indonesia. In 1933, during the colonial period, he wrote about the massive phenomenon of cheap Japanese textiles in Indonesia which caused the bankruptcy of Indonesian-owned textile companies.

For him, the arrival of cheap goods from Japan could cause a disaster. Because the presence of these elements can produce dependence. If this continues, he believes that one day people will no longer be able to use textiles because prices will be increased by foreign companies. And at the same time, we are not able to produce it ourselves.

First and last textile minister of the Soekarno era

When Indonesia became independent, Soekarno gave free rein to indigenous-owned textile businesses. Future great entrepreneurs such as Sudono Salim and Eka Tjipta were registered as having textile businesses, which had a positive impact on the industry.

Apart from that, during Soekarno's era, there was also a minister who focused on textiles, although his existence was only at the end of his reign. His name is the Minister of Textile Industry and People's Affairs headed by Muhammad Sanusi. This ministerial post was the first and last in history.

In 1961, Soekarno also established PN Industri Clothing as a state-owned textile production company. It later changed its name to PT Industri Sandang Nusantara (Persero).

However, on March 17, 2023, President Jokowi dissolved PT Industri Sandang Nusantara through Government Regulation of the Republic of Indonesia Number 14 of 2023 concerning the Dissolution of the Company (Persero) PT Industri Sandang Nusantara.

Photo: (CNBC Indonesia/Tri Susilo) Portrait of a domestic industry flooded with orders for school uniforms. (CNBC Indonesia/Tri Susilo)

Soeharto: Success Makes Indonesia 'Textile King'

When Soeharto took over as president, the textile industry was still receiving special attention, although the New Order government initially did not focus on developing the textile industry and chose to concentrate on the mining, oil and gas sectors.

This happened due to the improvement of the oil and gas industry after the increase in global oil prices in the 1970s due to the war. During the period known as the oil boom, Indonesia received abundant funds from its oil exports to various countries around the world. These funds are then used by the government to increase subsidies and start development.

But on the other hand, the government realizes that it cannot always depend on the oil and gas sector. As a result, in the early 1980s, the government began to emphasize programs to promote non-oil and gas exports.

Research by Jan Luiten van Zanden and Daan Marks in The Indonesian Economy 1800-2010 (2012: 388) explains that the implementation of this program became increasingly unstoppable as global oil prices fell, causing also led to a decrease in Indonesia's income.

Under these conditions, there is no reason for the government to postpone the program. After that, Soeharto proceeded with deregulation for protection that could hinder the development of manufacturing industry.

“These deregulatory measures include reductions in tariffs and barriers, liberalization of foreign regulations, financial sector reform, and efforts to reduce the monopoly power of large firms,” ​​write Jan Luiten van Zanden and Daan Marks.

Thanks to this policy, the Indonesian textile industry can benefit from a breath of fresh air. Furthermore, the textile industry is not something new in Indonesia. He had been there for a long time, so Suharto's policies made him even more active.

After this policy, private textile companies began to emerge. In a Tempo report (January 10, 1981), from 1978 to August 1980, 120 new textile projects emerged with an average annual investment of IDR 80 billion.

With the existence of this new industry, textile exports have jumped by 250%. After government support, total textile exports reached $34 million in the early 1980s and are expected to reach $50 million by the end of the year. In fact, this number is expected to increase in the coming years.

The protection granted by the government does not only occur in the domestic market, but also abroad. Still citing a Tempo report (January 10, 1981), the government dared to intimidate countries that restricted the entry of products from Indonesia. In England, for example.

When England imposed quotas on domestic textiles, the Indonesian government took retaliatory measures.

Coordinating Minister of Economy and Investment Widjojo Nitisastro immediately canceled the purchase of two British planes and projects in Indonesia. As a result, Prime Minister Margaret Thatcher admitted to losing hundreds of millions of pounds and encouraged her to reorganize quotas for Indonesian textiles in the UK.

Apart from this, the success of the textile industry in Indonesia during the New Order also relied on massive export-oriented investments from four newly industrialized countries in Asia, namely South Korea, Taiwan, Hong Kong, Singapore and Japan.

According to notes by Jan Luiten van Zanden and Daan Marks, under Suharto's rule, liberalization pushed industries from these countries to relocate to Indonesia. They manufacture textile and garment factories in Indonesia. Labor is also absorbed and can trigger economic growth.

In the end, this policy bore fruit and Suharto could be proud of this achievement. Because, the government notes each year, the textile industry constitutes the main support for economic growth and a catalyst for accelerated industrialization.

Nine years after this change in direction, the government managed to secure $1.65 billion in 1989. This figure then increased to almost $2 billion by the end of Suharto's rule.

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