How Indonesian Textile Giant Sritex Collapsed?

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, had become a limited liability company. 

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.

Source: https://id.wikipedia.org

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 U.S. $1.3 billion (21.1 trillion rupiah) 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. In October 2024, creditor PT Indo Bharat Rayon filed for Sritex bankruptcy, arguing the company had failed to meet its debt obligations.  

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

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

Between 2019 and mid-2024, at least 36 Indonesian textile firms have shut down, including PT Pismatex, a company that had operated since 1972. In the first half of 2024 alone, 10 textile companies laid off nearly 14,000 workers. 

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

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

Investor confidence in Indonesia’s textile sector is also likely to suffer, potentially discouraging future foreign investment. Competition (from China’s “dark” factories – fully automated), tariffs and financing costs are all causes for the downfall of a major giant or even an industry. It requires a lot more effort now just to survive! 

Reference:

How Indonesian textile giant Sritex collapsed – Analysis, Arie Firdaus, BenarNews, 8 March 2025