The ministry’s chemical, textile and miscellaneous industry director general, Achmad Sigit Dwiwahjono, said the revision, once completed, would be crucial to improving growth in the sector by up to 8 percent from the current rate of between 5 and 6 percent.

“The revision is crucial to address the current global demand and it will affect [textile production centers] like Bandung,” Sigit told reporters on the sideline of a gathering of businesspeople from chemical, textile and other industries (IKTA).

The relaxation on conditions for new investors to get tax incentives has been proposed to the Finance Ministry.

If approved, investors can enjoy tax allowances for expansion or investment of more than
Rp 30 billion (US$2.2 million) and employment of 150 workers. The current regulation stipulates that investors can get the tax break if they invest a minimum of Rp 100 billion and employ 200 people.

The new plan also sets to earmark Rp 400 billion every year to revitalize aging textile machinery.

With the new incentives, the ministry expects to create a better business climate, which in turn could improve the country’s textile market share in the world, which now stands only at 1.8 percent, far lower than Vietnam at around 6.7 percent.

Indonesia’s textile exports grew by 4.4 percent to $12.4 billion last year after declining 3.2 percent at $11.9 billion in 2016.

The ministry expects that textile exports could reach $13.5 billion and absorb 2.95 million workers this year. For next year, the figure is expected to reach $15 billion and 3.11 million workers.

Rival textile-producing countries like Vietnam have been enjoying high textile sector growth due to its attractive investment incentives. It also expected to enjoy lower tariffs to export more to the European Union under their bilateral free trade agreement (FTA).

Bangladesh and Sri Lanka, meanwhile, have been enjoying low tariffs to export textiles to the EU and the United States due to their status as one of the Least Developed Countries (LDCs).

To better compete against the rivals, the government has worked on accelerating the conclusion of the comprehensive economic partnership agreement (CEPA) with the EU, which is expected to conclude in 2019 and could be implemented in 2021.

The government is also engaging in talks with US businesspeople to know which products both countries can exchange with lower tariffs in any possible trade deals, as no FTA is being planned for the immediate future.

Anne Patricia Sutanto, a representative from the Indonesian Textile Association (API), said they had urged the government to pay attention to issues such as excessive taxation plans like those imposed for packaging and subcontracting work, high gas prices and disruption to electricity supply, which could damage costly machinery.

Value-added tax (PPN) on packaging and subcontractors will be taken into consideration for review, especially those applicable in bonded logistics zones, said Customs and Excise director general Heru Pambudi.

Deputy Energy and Mineral Resources Minister Arcandra Tahar acknowledged complaints on the high price of gas, including those in the textile sector, saying it was a result of business contracts made in the past between gas producers like Pertamina and Conoco Philipps with distributors PGN and Pertagas.

Arcandra said the contracts can be subject to review, but not without long-term legal consequences.

PLN, meanwhile, is testing a smart grid system to stop electricity from tripping starting this year.

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