Textile giant Sritex contests bankruptcy order as Indonesia vows to save 50,000 jobs

Jakarta – Indonesian textile giant Sri Rejeki Isman is contesting a court decision that declared it bankrupt as the company owner pledges to keep its factory open and see through the revival of the business.

Sritex, as the company is more commonly known, filed an appeal on Oct 25, requesting a review of the local court’s bankruptcy ruling, according to the court’s website. The court on Java island – where Sritex is based – had earlier granted the plaintiff’s demand to declare the company and its subsidiaries bankrupt for failing to meet payment obligations set in a debt restructuring agreement from 2022.

The appeal came as Indonesia’s newly minted President Prabowo Subianto called for a meeting on Oct 29 and ordered his ministers to come up with rescue options for Sritex, according to Coordinating Minister for Economic Affairs Airlangga Hartarto.

The Customs and excise office has already agreed to let the company resume import and export operations despite the bankruptcy verdict, Mr Hartarto said after the meeting.

Sritex, which has sewn clothes for global brands including H&M, Uniqlo and Zara, is one of the country’s largest apparel makers and employs roughly 50,000 workers. It fell into debt distress during the Covid-19 pandemic after orders slumped. Its total liabilities stood at US$1.6 billion (S$2.1 billion) as at end-June.

“I assure you that there will be no layoffs of Sritex workers,” Deputy Minister of Manpower Immanuel Gerungan said during his visit to the company’s factory on Oct 28. “This was agreed by the management represented by Sritex owner Iwan Setiawan Lukminto.”

Sritex has no intention of closing its factory and is focusing on continuing operations, as its business and financial conditions have shown signs of recovery over the past few years, Mr Lukminto was quoted as saying in a statement by the Manpower Ministry.

Not alone

Indonesian textile industry’s woes extend beyond Sritex. Rival firm Pan Brothers is also seeking to restructure its debt, amounting to US$325 million. 

The industry is one of the biggest employers in Indonesia and any widespread job losses would be an early setback for Mr Prabowo’s new government, which aims to turbocharge economic growth to 8 per cent from the current 5 per cent pace. Unemployment remains elevated in South-east Asia’s largest economy, dragging millions out of the middle class since the pandemic.

“The clothing industry has the highest proportion of women labour participation and unskilled workers,” said Dr Kiki Verico, an economist at the University of Indonesia. “These two are very politically sensitive groups.”

Domestic garment associations have demanded more government support to revive the sector, which has struggled to recover from the pandemic and has been hit by a flood of cheap imports, mainly from China. Despite the reintroduction of some safeguards and anti-dumping duties, industry players are also asking the government to tighten recently revised import regulations to curb a surge in shipments.

The National Federation of Trade Unions recorded that nearly 15,500 workers have been laid off in the country’s textile industry in 2024, according to Bloomberg Technoz, a partnership between Berita Mediatama Indonesia and Bloomberg Media Group. BLOOMBERG