How Indonesian Textile Giant Sritex Bankruptcy

Once Southeast Asia's largest textile manufacturer, Sritex, or Sri Rejeki Isman, closed its 58-year operation on March 1 after failing to repay debts, affecting more than 10,000 workers.

Mounting debt, falling sales, and a court’s bankruptcy ruling forced the Solo-based company out of business.

What began as a small fabric shop in Central Java nearly 60 years ago grew into one of Southeast Asia’s biggest textile manufacturers, outfitting military forces including the German military and NATO and supplying clothing-produced garments for global brands such as H&M, Uniqlo, and Zara to major global retailers. But 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. Many of them had spent their entire careers at Sritex.?

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.?

How did Sritex become a textile giant??

The Sritex journey began in 1966 when Muhammad Lukminto opened a small shop in Solo. By 1968, the business had expanded into textile production, and by 1978, it had become a limited liability company, according to the company’s website.

Throughout the 1980s and 1990s, Sritex evolved into a vertically integrated textile manufacturer. That meant it controlled stages of production in turning raw materials into finished goods.

During this time, it became the official supplier of uniforms for the Indonesian Armed Forces before securing contracts with the German military and NATO.?

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

By 2019, Sritex had reached annual sales of $1.3 billion (21.1 trillion rupiah)

What led to Sritex’s financial collapse??

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.

What happened to the workers??

In the first two months of 2025, at least 10,665 employees lost their jobs across Sritex Group’s four factories in Central Java.

Labor unions have expressed concerns about the timing of the shutdown, which occurred as 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.

Did the government try to intervene?

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.?

Does this signal a decline in Indonesia’s textile industry?

Sritex is not the only textile company struggling.?

Between 2019 and mid-2024, at least 36 Indonesian textile firms shut down, including PT Pismatex, a company that had operated since 1972, 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.

What are the economic consequences??

Sritex’s downfall is expected to have a ripple effect on Indonesia’s economy beyond its former employees. CELIOS estimates the bankruptcy could reduce Indonesia’s national GDP by 0.1% and cut regional GDP in areas where Sritex operated by 0.5%.

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

Is Indonesia facing deindustrialization??

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

Since 2010, manufacturing’s share of the GDP gradually shrank to where it remained below 20% between 2019 and 2024, according to government data—a figure that worries analysts.

The government must increase the manufacturing sector’s contribution to 25% of Indonesia’s GDP to achieve its economic growth target of 8%, said Marco Kamiya, the U.N. Industrial Development Organization’s (UNIDO) representative for Indonesia.

“The manufacturing sector must be a key focus if Indonesia aims to achieve its ‘Golden Indonesia 2045’ vision,” Kamiya told an economic forum last month, referring to the government’s goal of Indonesia becoming a high-income country by its centennial.

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