The blunder came to light at Saturday's opening ceremony in Kuala Lumpur, where the souvenir was handed out to dignitaries - including Indonesia's Sports Minister Imam Nahrawi, who tweeted a picture of the offending page.
In a statement issued after midnight, the Malaysia Organising Committee (Masoc) for KL2017 apologised for the error as well.
On Twitter, Indonesians said their flag represents the sacrifices of independence heroes and accused Malaysia of either being stupid or deliberately misprinting it. However, a flag with the colours in reverse order was identified incorrectly as the republic's flag in souvenir books distributed during the opening ceremony.
Malaysian organisers were quick to apologise and the country's Sports Minister Khairy Jamaluddin visited Nahrawi at his hotel to explain in person.
"(Datuk Seri) Anifah told me that an official apology would be issued by the Malaysian government to the Indonesian government via their respective foreign ministries", he said.
"Bapak Imam, please accept my honest apologies for this".
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The error made the red-and-white Indonesian flag resemble Poland's and caused anger in Indonesia.
"We very much regret the mistake and trust the strong bond between the two countries will further strengthen in the spirit of the SEA Games", they added.
Khairy, who is also Masoc chairman, said he had stopped the distribution of the erroneous souvenir book and a new edition with the appropriate correction would be issued. Youth and Minister Imam Nahrawi of Indonesia said the error was very painful. "So police need to take the necessary action and ensure it does not happen again".
Meanwhile, Wan Ahmad Najmuddin, 59, will be the new federal police Criminal Investigation Department director. "We don't want Indonesia to feel offended over this incident", he said yesterday while stating that police have not received any complaints from Indonesia over the matter.
As close neighbors, Indonesia and Malaysia have one of the most important bilateral relationships in Southeast Asia.