February 2025 may go down as a dark chapter in Indonesia's textile industry. One of Southeast Asia's largest textile factories, inaugurated by President Soeharto in 1966, met a tragic end in court.
After a prolonged struggle, PT Sri Rejeki Isman—also known as Sritex—was forced to shut down operations, leaving 10,965 workers unemployed. This decision followed the Semarang District Court's ruling that the company lacked business continuity .
Sritex was declared bankrupt after failing to meet its financial obligations to creditors. The court-appointed curator revealed that the company's revenue was insufficient to cover monthly employee salaries. With no viable path forward, the judge ruled that Sritex no longer had a sustainable business model.
This incident raises concerns about potential closures and job losses in other textile businesses. The Indonesia Fiber & Filament Yarn Producer Association reported that between 2022 and 2024, 60 textile factories implemented cost-cutting measures that included layoffs . By 2024 alone, 30 factories had either shut down completely or ceased production .
Despite these closures, Statistics Indonesia (Badan Pusat Statistik/BPS) reported a 4.26% growth in the textile and apparel industry in 2024 . In the second and third quarters, the industry even grew by 7.43% and 7.17% year-on-year, respectively.
However, this growth may be misleading. The Indonesian Trade Union Confederation argues that the sector's gross domestic product increase was driven mainly by export-oriented businesses . Much of this export growth could be attributed to stockpiles of products manufactured in previous years rather than new production.
To support the struggling textile industry, the government introduced several measures. One was the imposition of anti-dumping duties on polyester staple fiber (PSF) imports from India, China, and Taiwan under Minister of Finance Regulation Number 176 of 2022. This aimed to protect domestic producers and boost exports.
Another measure was the introduction of Article 21 Income Tax incentive borne by the government for employees in the footwear, textile, and apparel industries. Under Minister of Finance Regulation Number 10 of 2025, employers in these sectors were relieved from withholding Article 21 Income Tax from employee salaries for the January–December 2025 tax period.
However, these measures have done little to reverse the industry's decline. The anti-dumping policy has not significantly curbed textile imports. BPS data shows that in 2023, Indonesia imported USD 8,341,744,667 worth of textiles and textile products (BPS, 2024). By 2024, that figure had risen to USD 8,944,305,997 —a 7.22% increase year-on-year (BPS, 2025).
Similarly, the Article 21 Income Tax incentive came too late. While the policy was only introduced in 2025, signs of distress in the textile industry have been apparent since 2023. That year, Minister of Industry Agus Gumiwang acknowledged that despite overall growth in Indonesia’s manufacturing sector, the textile industry remained in contraction. The Purchasing Managers' Index (PMI) for manufacturing showed expansion in most sectors, yet the textile industry continued to struggle (Kemeperin, 2023).
In its report entitled “Managing Tax Incentives in Developing Countries”, the International Monetary Fund (IMF) outlines key principles for effective tax incentives. According to the IMF, tax incentives must have a clear objective, well-defined recipients, a temporary validity period, structured application procedures, and strict penalties for abuse (Pecho, Markov, Wood, Auclair, & Velayos, 2024).
Indonesia’s fiscal incentives for the textile sector have yet to fully align with these principles. To revive the textile industry, the government could consider more robust incentives, such as corporate tax holidays or reductions in corporate income tax rates for textile businesses. From a microeconomic perspective, such measures would allow companies to allocate resources more efficiently. Empirical studies also suggest that income tax incentives can drive investment in labor and fixed assets, particularly in small and medium enterprises (Xue, Cai, & Zhang, 2025). However, any tax relief should be timely, targeted, and temporary to prevent long-term dependency.
Another potential strategy is offering investment incentives similar to those in the Nusantara Capital City (Ibu Kota Nusantara/IKN) project. Under Government Regulation Number 12 of 2023, investors in IKN receive tax reductions based on their capital investment. A similar framework for the textile sector could encourage much-needed investment and drive industry revival. If these steps are implemented effectively, Indonesia’s textile industry may yet recover from its current crisis.
References
- BPS2024Statistik Perdagangan Luar Negeri Indonesia Impor 2023 Buku IJakartaBPS
- BPS2025[Seri 2010] Laju Pertumbuhan PDB Seri 2010 (Persen), 2024JakartaBPS
- BPS2025Buletin Statistik Perdagangan Luar Negeri: Impor Desember 2024JakartaBPS
- KemeperinMenperin: PMI Manufaktur Juni 2023 Naik Tinggi, Tapi Industri Tekstil Masih Menderita
2024Managing Tax Incentives in Developing CountriesNew YorkIMF - The influence of income tax incentives on small and low-profit enterprises’ production factor investment2025Economic System 491doihttps://doi.org/10.1016/j.ecosys.2024.101256
