The Bankruptness Of Sritex And The Critical Point Of The National Textile Industry

The news about PT Sritex's palpitation has received the attention of many parties. (Doc Sritex)

The news of the bankruptcy of PT Sri Rejeki Isman Tbk. (Sritex) quite surprised many parties. The fall of this large textile company is not only a company problem, but a sign of a crisis that lurks the national textile industry. Sritex, which recorded debt of up to 21 trillion rupiah, was not only pinched because internal problems or financial burdens were out of control, but also because of structural pressure that narrowed the national textile sector, which is one of the pillars of exports and employment in Indonesia.

Sritex, a fabric supplier and uniform for local and international markets, employs thousands of employees who are now facing uncertainty. Sritex's President Director, Iwan Setiawan Lukminto, stated that despite bankruptcy, the company's operations are still running. However, behind this promise, heavy obstacles block: accumulated debt, global tight competition, and domestic regulations that harm domestic producers. This combination hit the competitiveness of local producers such as Sritex.

Sritex, the textile company which is said to be the largest in Southeast Asia, is not only a job provider for its employees, but also supports many small and medium enterprises in the textile industry supply chain. As published in various media, it was recorded that there were around 14,112 Sritex employees who were directly affected, 50,000 employees in the Sritex Group, and thousands of MSMEs whose businesses depend on this company. This situation prompted the government under President Prabowo Subianto's leadership to consider bailout fund options as an effort to maintain Sritex's operational sustainability and prevent a massive wave of layoffs (PHK).

Data from BPS and the Ministry of Industry shows that Indonesia's export volume of clothing to become Indonesia in 2022 will reach USD 9.58 billion, the highest since 2018. However, in early 2023, exports experienced a significant decline of up to 22.1% (YoY), to USD 2.00 billion. Meanwhile, the import value of Indonesian clothing in 2022 was recorded at USD 127.36 billion, with a decrease of 13.51% in 2023 (January-March).

According to Iwan Setiawan Lukminto, the import policy through Permendag Number 8 has had a significant impact because it disrupts production operations and the textile industry and textile products. Because the regulation paved the way for floods of textile products from abroad, especially Asian countries such as China and Vietnam. These products are sold at cheaper prices and flood the domestic market, resulting in local products such as Sritex having difficulty competing. In this situation, local products are increasingly pressed in their own markets.

Meanwhile, the Chairman of KSPI, Said Iqbal, said that mismanagement was also the cause of Sritex's deteriorating condition. However, this error cannot be borne by management alone without considering the role of regulations that are less supportive. This situation shows the need for stronger protective and proactive policies to support the domestic industry to be more competitive, including effective anti-dumping policies and financial support.

At the global level, competition in the textile sector is getting tighter. Countries such as Bangladesh and Vietnam are Indonesia's main competitors because they are able to produce textiles at lower costs. The Bank Indonesia and BPS reports show that Indonesian textile exports continue to decline because products from these countries are cheaper and have higher competitiveness. Sritex faces major challenges in the international market that prioritizes efficiency and low prices, while production costs in Indonesia tend to be high.

The government through the Ministry of Trade opens the option of bailout funds to maintain Sritex operations and prevent wave layoffs. However, bailout funds are not sufficient if they are not accompanied by improvements to local industry governance and protection policies. Without strong anti-dumping and protection policies, the national textile industry will only repeatedly face the same threat.

Support in the form of tax incentives, cutting production costs, and reducing raw material import costs can help this sector survive. In addition, efficiency and innovation improvement must be the focus to strengthen the competitiveness of textile products in the global market.

Sritex's bankruptcy is a strong warning to the industrial ecosystem. If the right solution is not taken immediately, this sector will further decline and lose its competitiveness. The settlement of this crisis must be interpreted as a step to maintain the national textile industry while avoiding wider deindustrialization. Saving Sritex means saving the local textile industry and economic sustainability for thousands of workers and MSMEs who depend on it.

The decision is now in the hands of the government and all stakeholders. Will we save and reform the textile industry or let it slump under global market pressure? Policies that support the Indonesian textile industry will open up opportunities to rise from adversity. However, without concrete action, Sritex's bankruptcy story could be the beginning of a bigger crisis in the future. (Iqbal irsyad)