Indonesia's upstream textile sector has lost its anchor supplier. PT Sri Rejeki Isman (Sritex), Southeast Asia's largest vertically integrated textile manufacturer, ceased operations in March 2025 after the Supreme Court rejected its final bankruptcy appeal in December 2024. More than 10,000 workers lost their jobs.

The numbers trace a steep decline. At its peak in 2019, the Sukoharjo, Central Java-based company booked revenue of US$1.3 billion. By 2023, revenue had fallen to US$325 million while debts climbed to US$1.6 billion. Competitive pressure and falling demand drove the slide, which began before the pandemic and accelerated through it.

The collapse carries legal exposure for the former leadership. Two brothers who ran the company, Iwan Setiawan Lukminto and Iwan Kurniawan Lukminto, are standing trial over allegations they caused Rp 1.35 trillion (US$81 million) in state losses through a corruption scheme involving credit facilities. Both men have objected to the charges.

For sourcing teams, the more consequential story is the policy response. Jakarta has restricted textile imports repeatedly since 2019, and China — which supplies roughly half of Indonesia's textile imports — has been the explicit target. In July 2025, after Sritex's bankruptcy, the government reversed an earlier liberalisation and reinstated technical considerations (PerTek) requiring Industry Ministry approval for textile imports. Active safeguard mechanisms now cover key inputs, including cotton yarn, fabrics and synthetic fibre yarn.

The protection has not stabilised the sector. The upstream firms these measures were designed to shield continue to shut down. Meanwhile, downstream garment manufacturers face rising input costs that weaken their position in export markets. The industry is squeezed from both ends.

The contrast with Vietnam sharpens the sourcing picture. Vietnam has wage levels comparable to Indonesia's, yet its downstream garment makers have kept gaining global market share — supported by access to cheaper imported inputs from China. Indonesian garment producers, by contrast, pay more for protected yarn and fabric and compete against the same buyers.

The Sritex case illustrates a structural problem for Indonesia's textile value chain: scale alone does not deliver competitiveness, and shielding upstream producers can ultimately destroy more jobs than it saves. A single vertically integrated champion absorbing 10,000-plus workers proved fragile when demand shifted and cheaper inputs flowed to regional competitors.

For buyers, the decision is now concrete. Indonesia's upstream capacity has lost its largest player, and remaining fabric and yarn suppliers operate behind import approvals and safeguard duties that raise input prices. Vietnam offers similar labour costs with open access to Chinese inputs. Sourcing directors weighing Indonesian garment capacity against Vietnamese alternatives must price in the protected input regime. Those consolidating orders in Indonesia should verify their suppliers' fabric sourcing channels and cost stability before committing volumes for the coming seasons.