Indonesia's garment industry is a relatively young industry which only emerged as a factory activity around the mid-1970s. This was in response to an expanding domestic market and growing export opportunities. Before the 1970s garment production was largely conducted in small tailor shops all over the country. Since the mid-1980s up to the Asian economic crisis of 1997–98 the garment industry emerged as one of the most important export-oriented industries, generating increasing foreign exchange revenues and job opportunities for low skill, mostly women workers, because of its labour-intensive production process. After the Asian economic crisis garment exports declined because of declining competitiveness in the face of strong competition from other developing countries, particularly China and Vietnam. Unfortunately, due to its relatively low international competitiveness, Indonesia's garment industry was not able to take full advantage of the expiry of the Multi-Fibre Arrangement in early 2005 to increase its exports.

Since the mid-1980s, Indonesia's garment industry emerged as one of the most important export-oriented industries, generating a rising stream of foreign exchange earnings and many job opportunities, mostly for low skilled, predominently women workers because of its labour-intensive production process. Except for a temporary decline in garment exports in the first two years after the Asian economic crisis, post-crisis garment exports until the expiry of the Multi-Fibre Arrangement (MFA, also known as the Agreement on Textile and Clothing) have generally been higher than before the crisis, despite the concern that the competitiveness of Indonesia's garment industry had declined in the face of strong competition from other developing countries, particularly China, Vietnam, India and Bangladesh. However, while garment exports after the expiry of the MFA have slightly increased, there is as yet no strong evidence yet that the garment industry will be able to take full advantage of the expiry of the MFA to substantially raise its garment exports.

This paper will first give a detailed overview of the development of the garment industry since the 1970s up to the expiry of the MFA. The paper will then discuss the development of this industry after the expiry of the MFA in early 2005, the problems it is facing at present, and the prospects for a revitalisation of this industry.