Indonesia’s upstream textile industry remained under considerable pressure during the first half of 2026, reflecting the persistent structural challenges facing the sector. Weaker demand from downstream manufacturers significantly affected production, while the continued influx of imported textile products further eroded the competitiveness of domestic producers. These conditions resulted in a decline in production among fiber and filament yarn manufacturers, highlighting the fragile state of the country’s textile supply chain.
According to the Chairman of the Indonesian Synthetic Fiber and Filament Yarn Producers Association (APSyFI), production in the upstream textile industry declined by approximately 5% year-on-year during the first semester of 2026. The contraction was primarily driven by reduced orders from downstream industries, including fabric manufacturers and garment producers, which have themselves been struggling with weak market demand and intensifying competition.
Domestic market conditions continued to deteriorate as imports of textile products including yarn, fabrics, and finished garments maintained their upward trajectory. This sustained increase in imports has gradually reduced the market share of locally manufactured products, placing additional pressure on domestic producers.
The trend has persisted over several years, suggesting that imported products have become increasingly dominant across multiple stages of the textile value chain. Industry participants argue that the continued expansion of imports has limited the ability of local manufacturers to fully utilize production capacity, reducing economies of scale and profitability.
On the raw material side, market conditions remained relatively stable. Prices generally followed international commodity trends and experienced a slight decline during the reporting period, providing some relief to manufacturers’ production costs.
Overall raw material availability remained adequate, although the industry experienced minor supply disruptions involving monoethylene glycol (MEG), one of the essential feedstocks used in synthetic fiber production. While the shortage was not severe enough to significantly disrupt production, it highlighted the industry’s continued dependence on imported petrochemical inputs and global supply chains.
Despite stable input prices, APSyFI believes that the outlook for Indonesia’s textile industry remains challenging for the remainder of 2026. Domestic demand is expected to stay weak, and the association sees limited signs of a meaningful recovery unless structural issues within the domestic market are addressed.
As a result, many manufacturers are increasingly relying on export markets to sustain production. Export demand has shown early signs of improvement as global economic conditions gradually recover, offering opportunities for Indonesian textile producers to diversify away from sluggish domestic sales.
However, securing export orders remains highly competitive and requires greater marketing efforts, compliance with international standards, and the ability to compete on both price and quality.
Although export markets provide some optimism, they are unlikely to fully offset weaknesses in the domestic market. Indonesia’s domestic textile market remains one of the largest in Southeast Asia, supported by its sizable population and growing consumer base. Nevertheless, the industry’s ability to capitalize on this market is constrained by the continued penetration of imported products.
According to APSyFI, domestic policy has become the most influential factor determining the industry’s future performance. Industry stakeholders contend that government policies affecting import regulation, trade enforcement, and domestic industry protection will largely determine whether local manufacturers can regain market share.
The industry’s concerns also reflect broader structural issues that have affected Indonesia’s textile sector in recent years. Rising imports, particularly lower-priced products from major textile-producing countries, have intensified competition throughout the supply chain.
At the same time, manufacturers continue to face relatively high production costs, including labor expenses, logistics, financing, and energy costs, which reduce their international competitiveness. Combined with subdued domestic consumption and cautious global demand, these factors have constrained investment and production expansion within the upstream textile industry.
Looking ahead, APSyFI expects export market recovery to continue gradually through the end of 2026. However, the association emphasizes that a comprehensive recovery of Indonesia’s textile industry will depend not only on improving global demand but also on effective government policies aimed at managing imports, strengthening trade enforcement, improving industrial competitiveness, and creating a more balanced competitive environment for domestic producers.
Without stronger policy support, the domestic market is expected to remain under pressure, limiting the industry’s ability to achieve a sustained recovery despite improving conditions abroad.
