Tax incentives under customs facilities for sustainable and competitive textiles and wearing apparel in West Java

The manufacturing industry dominates West Java Province’s Gross Domestic Product (GDP), with the textile and wearing apparel sector as a key contributor and the second-largest employer in the region. The Textile and Textile Products (TPT) sector benefits from customs facilities such as Bonded Storage (TPB) and the Import Facility for Export (KITE). However, the manufacturing workforce experienced significant shocks in 2020 and 2023, with contractions of -12.76% and -1.85%, respectively. The number of layoffs reached 4,629 in 2022, increased to 19,217 in 2023, and stood at 5,567 as of September 2024. This research aims to develop an early warning system for the TPT industry, assess the impact of customs facilities on investment, employment, and exports, and identify customs policy measures to strengthen the sector. A mixed-methods approach, combining quantitative descriptive analysis and qualitative interpretation, is applied. The study uses secondary data from 2019 to 2024 and primary data from in-depth interviews with officials from the Directorate General of Customs and Excise, TPT companies receiving facilities, bonded zone entrepreneurs, and related associations. The findings indicate that key early warning indicators for layoffs include demand from export destination countries (NTE), minimum wages, and the availability of raw materials. Customs facilities positively influence investment, employment absorption, and net exports, while also contributing to a reduction in unemployment. Effective customs policies to support the TPT industry include strict enforcement against illegal goods, protection of domestic industries, local export destination programs, inland free trade agreements (FTAs), and strategies for companies to improve product quality and diversify their buyers.