Problems in Indonesia's indigenous textile industry are becoming more acute

The country's textile industry is in big trouble and the declaration of bankruptcy by PT Sri Rejeki Isman Tbk or Sritex has sounded the alarm bells that need immediate government intervention to diagnose it correctly and provide a panacea to revive the labor-intensive textile industry and the domestic textile products.Sritex has long been an icon of Indonesia's high-quality textile industry, and the executive director of the Indonesian Textile Association (API) said that if a factory of this size could collapse, it meant that something had to be taken care of. It is necessary to look at what led to the collapse of Sritex, whether it was internal management problems or external problems related to the business environment of the textile industry. However apart from that, the collapse of Sritex is a serious message for the government to give attention and support to the textile industry. The reason for this is that the textile industry is labor intensive and can absorb a large number of workers and thus can help the government in pulling up the economic growth, which will be stimulated by the absorption of the number of workers and the increase in the performance of the manufacturing industry. The textile industry is under pressure from various quarters, domestically the industry finds it difficult to compete as the domestic market is flooded with cheap or competitively priced imported products. Some imported goods are subject to legal procedures, but there are also those that enter through illegal means.The flooding of imported products has become more serious after the issuance of Trade Minister Regulation No. 8 of 2024, regarding the issuance of the third revision of the Trade Minister Regulation No. 36 of 2023 on Import Policies and Regulations, which has led to an influx of imported products into the Indonesian market. The regulation eliminated the Ministry of Industry's technical considerations (pertek) regarding imports, and finally it became easier to import manufactured products, while the textile industry found it difficult to sell their products. When the export market is in the doldrums, the domestic market, with a population of 280 million, should be reliable.

On the other hand, export markets are also sluggish due to the global economic slowdown. At the same time, the textile industry is facing rising production costs, such as rising energy prices and labor wages. At a time when the export market is in the doldrums, the domestic market with a population of 280 million should be reliable. After all, TPT produces products that fulfill the basic needs of the community, which is their main concern, so that the domestic market can be protected. The general chairman of the Association of Indonesian Fiber and Filament Producers (APSyFI) said that the decline of the TPT industry is due to the lack of synergy between inter-ministerial policies on TPT, and that the government actually understands the problem, i.e., the domestic market is flooded with imported goods. However there are actually policies that can make importation easier. They hoped that the new government would enhance synergies between ministries and also strengthen the fight against illegal import smuggling. The textile industry is strategically important for encouraging economic growth because it is labor-intensive and provides a large number of jobs for society. Answering questions from journalists after his inauguration in Jakarta, the Minister of Industry said that the government would focus on creating as many jobs as possible, and that the government receives spending allocations from the State Revenue and Expenditure Budget (APBN) in order to create jobs. Job creation is the responsibility of all government departments, however job creation was immediately felt in sectors such as manufacturing. The textile industry is also under pressure from the impact of regulatory products introduced by other ministries, an example of this is the Minister of Trade's Regulation No. 8 of 2024, which he believes was the trigger for the decline of the manufacturing and textile industry. The regulation, which will come into effect from May 17, 2024, led to a decline in the textile industry. By early July 2024, at least 11,000 workers will be laid off.

The manufacturing sector also contracted, as reflected in the Purchasing Managers' Index (PMI) released by Standard & Poor's Global, which has contracted for three consecutive months since July.The July-September indexes were 49.3, 48.9, and 49.2, respectively.The textile sector is also under pressure from the impact of regulatory products introduced by other ministries. A reading below 50 indicates contraction, while above 50 indicates expansion. prior to July, the PMI had been in expansion for 34 consecutive months. the last time Indonesia was in contraction was in august 2021, the index said. For this reason, he has proposed to the Prabowo government to amend Permendag 8/2024, which is to protect the domestic market from uncontrolled import attacks. It is hoped that the domestic manufacturing sector, including textile, will recover, expand and provide more employment opportunities for the community. The Director of Evaluation of the Indonesian Stock Exchange (BEI) said that in response to the news of the bankruptcy decision of Sritex, codenamed SRIL stock, the exchange immediately responded to protect investors. He asked SRIL to provide the public with information on the company's follow-up actions and plans on the bankruptcy decision, including SRIL's efforts to maintain business continuity. In terms of monitoring listed companies, the IDX has also made several efforts to protect retail investors, one way being the imposition of special symbols and their placement on the Special Monitoring Committee. This may be done if the issuer meets certain criteria under Regulation IX of the IDX for listing equity securities on the SSC, and it is hoped that this will provide investors with an initial awareness of possible problems with the listed company.

According to PT Sri Rejeki Isman Tbk's financial report for the second quarter of 2024, the company's consolidated loss for the year was $25.73 million, or about Rp 401.94 billion. This loss was about three times less than the same period in 2023, or $78.03 million, or about Rp 1.21 trillion. The loss occurred because the net sales revenue was lower than the cost of sales. in the second quarter of 2024, the net sales reached US$131.72 or about Rp2.05 trillion. Meanwhile, the cost of sales reached US$150.24 million or about Rp 2.34 trillion, which led to the company's total loss of US$18.51 million or Rp 289.15 billion.Sritex's whopping 56.97% of business came from domestic sales, while the remaining portion was exported sales, which accounted for 43.02%.In terms of merchandise categories, yarn sales (both export and domestic sales) are the largest contributor, accounting for 51.791 TP3T of the total sales.The rest are sales of finished fabrics, garments and raw fabrics. Overall, however, net sales revenue for Q2 2024 contracted by 26.70% compared to the same period in 2023.On the other hand, Sritex's cost of goods sold actually decreased by 24.21% compared to the same period in 2023.The most significant portion of the decrease in cost of goods sold came from raw material purchases, but it was clearly still greater than the revenues it was able to generate. Sritex's Board of Directors has not yet responded to calls or messages from the media prior to this news release.