Danantara : The Textile State-Owned Enterprise’s Misguided Rp101 Trillion Plan

By Eko B. Supriyanto, Chairman of Infobank Media Group

The government has announced its largest economic intervention plan in a decade, disbursing Rp101 trillion to form a new state-owned textile company that will be run by the Daya Anagata Nusantara (Danantara) Investment Management Agency (BPI). This policy is touted as a “rescue”.

However, upon closer inspection, it smacks of the “romanticism” of the New Order industry and carries the risk of extraordinary waste of state resources. It is unclear where the idea for this large textile factory came from, while the private textile sector is left to fight in the market until it collapses one by one.

Coordinating Minister for Economic Affairs Airlangga Hartarto argued that this policy was born out of President Prabowo Subianto’s concern and the need for an industrial rescue roadmap. However, there is a striking paradox.

The roadmap, which is said to increase exports within 10 years and deepen the value chain, actually begins with the most crude instrument: a massive capital injection into a single company. Meanwhile, textile industry banks are struggling and going out of business due to misguided government policies over the past 10 years.

According to internal discussions at the Infobank Institute, allocating Rp101 trillion—equivalent to building 1,200 km of new toll roads or adding to the national health budget for a year—to a single state-owned enterprise in a mature and highly competitive sector is a step.

In fact, instead of strengthening the foundation by improving the business climate and simplifying licensing procedures, or providing cheap energy to all industry players, the government has chosen to become the main player through state-owned enterprises. This is a chronic symptom of the “project officer” mentality in the bureaucracy. Complex problems are answered with giant projects that look impressive on paper but are fragile in execution.

The question is, why a new state-owned enterprise? Why Danantara? Are there no existing state-owned enterprises or competent private national companies that can be given the mandate and supervised in their partnership with small and medium industries?

According to Infobank, this decision has the potential to create a new state-controlled “cartel.” It also stifles innovation and kills the market that should be strengthened. This policy risks repeating past failures, where SOEs were used as political tools and flagship projects, rather than drivers of efficiency and mutual progress.

The Myth of “Downstreaming”

According to Infobank records, the government often sells the narrative of “downstreaming” and “deepening the value chain” as a mantra for salvation. In the context of textiles, true downstreaming means empowering local cotton farmers, strengthening small spinning and weaving industries, and promoting high-value fashion design.

However, the reality is different. This plan looks more like consolidation downstream—forming giant factories. Meanwhile, the upstream remains neglected. And, it leaves the business climate reeling from policies that are difficult for the market to read. Thuggery occurs everywhere.

According to the Infobank Institute, the focus on forming new state-owned enterprises should instead shift attention to the root problems of the national textile industry. These include competitiveness being eroded by high logistics and energy costs, as well as a flood of illegal and smuggled imports. Not only that, it is necessary to fix regulations that do not support ease of doing business and, of course, the lack of skilled labor at the technical and design levels.

According to the results of a limited discussion by the Infobank Institute, the Rp101 trillion in funds would have a much greater impact if it were allocated to solving these fundamental problems—which would benefit all business actors—rather than to building a new state business empire.

A Leap into the Past, Not the Future

There are many opinions about the construction of this jumbo textile factory. For example, the most worrying aspect is the philosophy behind this policy. This plan is a nostalgic leap back to a time when the state was the main driver of every aspect of the economy.

The world has changed. The 4.0 industrial revolution and global pressure for green industry demand agility, rapid innovation, and sustainability. The bureaucratic structure and centralized decision-making inherent in state-owned enterprises—especially those born out of political projects—are ill-suited to the demands of the times.

The government seems to have forgotten that the glory of Indonesia’s textile industry in the 80s and 90s was driven by the dynamism of the national private sector and foreign direct investment, not by SOEs. The role of the state should be as an intelligent regulator and facilitator, not as a competitor to its own citizens.

It would be better to hand over textile factories to the private sector. In fact, the government lost momentum when PT Sri Rejeki Isman Tbk (PT Sritex) went bankrupt. The government should have taken over ownership beforehand—removing all former owners and temporarily becoming the owner to place orders. For example, orders for uniforms for the Indonesian Armed Forces, the police, and civil servants. Thus, employees would continue working without layoffs. The government would be present and avoid incurring a loss of up to Rp101 trillion.

Therefore, the plan to establish the Rp101 trillion state-owned textile company Danantara is the wrong prescription for an unclear diagnosis. It is a wasteful policy that carries a high risk of creating market distortions and reflects an outdated economic mindset.

In closing, Infobank Institute offers another alternative. First, cancel plans to establish a new state-owned enterprise. Redirect the funds to the National Textile Industry Competition Fund. Second, use the funds for targeted subsidies for energy and logistics for all textile industries that meet efficiency and labor absorption standards.

Third, build textile innovation and design centers in industrial hubs (such as Bandung, Pekalongan, Solo) that are open to MSMEs. Fourth, strengthen law enforcement against illegal goods and smuggling.

Fifth, if Danantara must be involved, it should function as a catalyst and guarantor to attract world-class private investment into the upstream textile industry chain, not as an operator.

Currently, Indonesia’s economy requires intelligent, inclusive, and contemporary policies. It is not merely about reviving the “textile state-owned enterprises,” which are relics of the past. The state must be present to empower, not to centralize and control. The private sector must continue to play a role in driving the economy and creating employment opportunities.

Hopefully, the construction of this Rp101 trillion textile factory will not be just another promise, “we will” and “we will” — like the plan to build a Rp20 trillion chicken farm. Also, a milk factory, and also we will… we will. All of these require realization, taking into account the initial formation of Danantara.

Danantara’s plan to establish a “jumbo” textile factory could be considered the economic ‘romanticism’ of the New Order. To be honest, the Rp101 trillion textile state-owned enterprise plan was ill-timed. And, according to Infobank, it seems that it will also suffer the same fate as “We will… We will” — which has been heard many times by the public.

Honestly, if we hear about many “entrustments” from the government that seem to have “suddenly” been given to Danantara, it could complicate its future steps. In fact, Danantara also has to fix the performance of SOEs, some of which are still losing money. That is also a difficult task that has been almost forgotten with ambitious programs such as the construction of this jumbo textile factory.

Numerous government project orders are causing Danantara to lose focus on improving SOEs. Let’s not let the state budget (APBN) bear the burden again due to misplaced priorities in investments, including this textile factory investment worth Rp101 trillion. (*)