The Collapse of Textile Giant Sritex: Debt Crisis, Bankruptcy, and Mass Layoffs

JAKARTA, investortrust.id – Indonesia’s largest textile manufacturer, PT Sri Rejeki Isman Tbk, better known as Sritex, has officially shut down operations as of March 1, 2025, following a crippling debt crisis that led to its bankruptcy and the mass layoff of 10,665 employees.

Once a dominant player producing military uniforms for NATO and the German army, Sritex crumbled under Rp 32.6 trillion in debt, unable to compete with cheaper textile imports and rising production costs.

The company's downfall highlights deep structural issues in Indonesia’s textile industry, sparking urgent calls for government intervention to protect local manufacturers from foreign competition and outdated industrial policies.

Mounting Debt Leads to Financial Collapse

Sritex, founded by the Lukminto family in 1966, struggled with mounting debts in recent years. According to curator Denny Ardiansyah, the company’s outstanding liabilities totaled Rp 32.6 trillion, with the largest portion—Rp 24.7 trillion—owed to unsecured creditors. Additionally, four state-owned banks—PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk (Bank BJB), PT Bank Negara Indonesia (Persero) Tbk (BNI), PT Bank DKI, and PT Bank Rakyat Indonesia (Persero) Tbk (BRI)—filed claims totaling Rp 4.8 trillion against Sritex.

Sritex’s bankruptcy was not caused by single event, instead it resulted from a perfect concoction of financial mismanagement, aggressive debt-fueled expansion, and shifting market conditions. It was a classic case of a heavily indebted company running into an unexpected downturn.

During the 2010s Sritex expanded aggressively, borrowing over $2 billion to fund new factories and production. The company secured big international customers – at one point producing clothes for brands like H&M, Uniqlo, J.C. Penney, Guess, and Walmart.

However, increasing global competition, especially from China, and a flood of cheap imports into Indonesia started pressuring profits. Indonesia’s import policies were quite lax – there were few barriers to prevent a flood of cheap textile products from China. This oversupply from abroad led to intense price competition and signs of market saturation for local players.

Then, the COVID-19 pandemic devastated global textile demand, forcing brands to cut orders, an external economic shock that brutally exposed Sritex’s vulnerabilities. Sritex’s revenues plummeted, but its massive debt remained. In April 2021, the company failed to pay $850,000 in loan interest, triggering legal action and a PKPU debt restructuring process to avoid immediate bankruptcy.  

Sritex, which once produced military uniforms for NATO and the German army, first encountered serious financial troubles when one of its suppliers, PT Indo Bharat Rayon, filed for its bankruptcy in 2021. Despite a court-approved restructuring deal in early 2022, Sritex struggled to regain stability. High inflation, weak consumer demand, and fierce competition kept profits low. The company continued to report losses, with debt still at $1.6 billion in 2023.

In early 2024, Sritex failed to pay Rp 100 billion ($6–7 million) to the creditor, violating its restructuring agreement. That lead to the Semarang Commercial Court declared Sritex bankrupt in October 2024. By December 2024, Indonesia’s Supreme Court upheld the ruling, finalizing the company’s liquidation. The verdict, recorded under Case No. 1345 K/PDT.SUS-PAILIT/2024, was delivered by Chief Justice Hamdi, along with Justices Nani Indrawati and Lucas Prakoso.

Call for Government Action

The bankruptcy of Indonesia’s largest textile manufacturer has raised concerns about the future of the country’s textile industry. Esther Sri Astuti, an economist from the Institute for Development of Economics and Finance (Indef), urged the government to increase protection for local textile manufacturers.

“The industry’s problems stem from heavy reliance on imported raw materials, particularly from China. When we import from them, our dependency increases, and due to high business costs, our products become more expensive and uncompetitive—even domestically,” Astuti said during a national seminar at Mercure Hotel Sabang, Jakarta, on February 28, 2025.

She also criticized Indonesia’s lenient import policies, arguing that the government has not provided adequate protection for local textile manufacturers.

“Even within our own market, we cannot compete because Chinese products are cheaper,” she added.

Another issue is the aging machinery used by Indonesian textile producers. Compared to China and other competitors, local manufacturers operate at a lower production capacity, estimated at only 70% efficiency.

“Most of our textile factories still use outdated machines, while China and other competitors have far more advanced equipment,” she explained.

In addition to infrastructure challenges, Indonesia's workforce is also at a disadvantage. Unlike China and the United States, which have university-level textile education programs, Indonesia's vocational training is limited to high school and technical schools (SMK).

“Textile education in Indonesia is mostly at the high school level. The workforce quality is insufficient, and on top of that, the regulations are not supportive—imports are still being pushed aggressively,” she remarked.

Astuti acknowledged that the textile industry is often considered a “sunset industry”, despite its dominance in the 1990s. However, she believes solutions can still be found, such as reducing raw material costs and expanding textile education programs.

Government Pledges to Support Workers

According to Sumarno, the head of the Sukoharjo Industry and Labor Office, affected employees were formally laid off on February 26, 2025, with their last working day on Friday, February 28, 2025.

“The total number of Sritex employees affected by the layoffs is 10,665. Severance pay is the responsibility of the curators, while old-age security benefits fall under the jurisdiction of BPJS Ketenagakerjaan,” said Sumarno.

In response to the mass layoffs, the Ministry of Manpower assured that it would advocate for the rights of former Sritex employees. According to official data, curators began the layoff process in January 2025, culminating in the final wave on February 26, 2025.

“The Ministry of Manpower will remain at the forefront in ensuring that the rights of Sritex workers are protected,” an official statement read.

As of February 28, 2025, all Sritex employees have officially stopped working, marking the end of an era for one of Indonesia’s largest textile manufacturers.