"EXPLAINED: How Indonesian textile giant Sritex collapsed", 7 March 2025

...on March 1, the Sritex factory floors in Solo (Surakarta) fell silent.

The company, brought down by mounting debts and a court-declared bankruptcy, officially ceased operations, leaving more than 10,000 workers jobless...

The collapse marks one of the largest industrial shutdowns in Indonesia’s recent history, raising concerns about the fate of the nation’s textile sector, a key driver of its economy...

The company...produced garments for retailers such as Walmart, Sears, H&M, Uniqlo and Zara...

Sritex’s troubles began in 2020 when the COVID-19 pandemic disrupted global supply chains and weakened consumer demand. Sales plummeted to $847 million (13.7 trillion rupiah), leading to the company’s first recorded loss since going public, according to its financial reports.

By mid-2024, Sritex’s total obligations had ballooned to $1.6 billion (26.2 trillion rupiah), nearly double its 2019 debt level.

Despite reaching a temporary debt restructuring deal in 2022, creditors lost confidence. Last October, creditor PT Indo Bharat Rayon filed for Sritex bankruptcy, arguing the company had failed to meet its debt obligations.

The court ruled in favor of Indo Bharat Rayon and Indonesia’s Supreme Court upheld the decision in December, making the bankruptcy legally binding.

Labor unions have expressed concerns about the timing of the shutdown, which occurred as the Ramadan fasting month began in Indonesia. Many workers suspect this was a strategy to avoid paying Eid al-Fitr bonuses.

“We’re asking: Is this a way to deny us our rightful bonuses?” said Slamet Kaswanto, head of the Sritex Workers’ Union, during a parliamentary hearing.

Meanwhile, the Indonesian government has pledged to assist affected workers, with the Ministry of Manpower working to ensure that severance payments and unemployment benefits are disbursed...

Sritex’s collapse drew national attention, prompting President Prabowo Subianto’s new administration to consider intervention. In late 2024, the government assigned four ministries, including the Ministry of Industry and the Ministry of Finance, to explore rescue options.

Despite these efforts, the bankruptcy ruling led to mass layoffs. The government has since shifted its focus toward reemploying former Sritex workers, with officials claiming that new investors are interested in leasing Sritex’s equipment to restart production...

Sritex is not the only textile company struggling.

Between 2019 and mid-2024, at least 36 Indonesian textile firms shut down, including PT Pismatex...according to the Confederation of Nusantara Trade Unions (KSPN).

In the first half of 2024 alone, 10 textile companies laid off nearly 14,000 workers, the union said.

Bhima Yudhistira, director of the Center of Economic and Law Studies (CELIOS), blamed the weakening of Indonesia’s manufacturing competitiveness on high costs, inconsistent government policies and rising interest rates.

Additionally, Indonesia has struggled to compete with countries such as Vietnam and Bangladesh, which offer lower production costs to attract major global fashion brands, he said.

Jemmy Kartiwa Sastraatmadja, chairman of the Indonesian Textile Association (API), said trade protection policies implemented by several countries to limit exports to major textile producers such as China had led to overstocked inventories.

“As a result, the surplus is being exported to countries with weak trade protection policies, such as Indonesia,” Jemmy told BenarNews.

In January, Redma Gita Wirawasta, who chairs the Indonesian Filament Yarn and Fiber Producers Association, told journalists that Indonesian factories have struggled to compete with cheap clothing from China flooding the market...

Investor confidence in Indonesia’s textile sector is also likely to suffer, potentially discouraging future foreign investment, the think-tank said.

Sritex’s bankruptcy highlights a broader issue – the steady decline of Indonesia’s manufacturing sector...