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Nearly 50,000 factory workers lose their jobs
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M. Hanif Dhakiri - JP/Jerry Adiguna
Nearly 50,000 factory workers have been dismissed in recent weeks as the country's economic slowdown has begun to pinch the country's labor intensive industries.
Around 200 footwear manufacturers in Tangerang, Bandung and Surabaya have laid off about 40,000 workers so far, according to the Indonesian Footwear Association (Aprisindo). In addition, 120 textile producers in Bandung regency, West Java, took similar measures, firing at least 6,300 workers, according to the Indonesian Textile Association (API).
The business groups said Tuesday that the firms, mostly small and medium enterprises, had been hurt by domestic sales plunging significantly as people's purchasing power weakened on the back of an economic slowdown.
Indonesia's economy decelerated to 4.71 percent year-on-year (yoy) in the first quarter, its slowest pace in nearly six years, partly due to lower domestic consumption.
Aprisindo chairman Eddy Widjanarko said that shoemakers' sales dropped by nearly 50 percent in the first quarter due to a decline in orders in the local market. The decline continued in April and no signs of recovery were expected in the coming months, he added.
'Normally, we produce a lot ahead of Idul Fitri as demand rises. But, now we are stopping operation because stocks are piling up in warehouses,' he told The Jakarta Post.
Demand for shoes and clothing usually increases a month ahead of Idul Fitri, which will fall on July 17-18 this year.
Eddy further said that the current wave of layoffs could last longer than usual, with the impact likely to be felt within eight months.
Similarly, API chairman Ade Sudrajat had said textile firms trimmed production time from seven days to just three days as a result of weak sales. Sales slumped by more than 40 percent in the January-April period from the past year.
'We are really shocked by this situation. Our warehouses are full because we cannot sell,' he said.
A recent Nielsen survey revealed that more than half of Indonesians considered the country currently 'in a recession'.
Although they still maintained an optimistic outlook on personal finances and job prospects, they tended to forgo purchases of 'less important items', including clothes and electronic devices, while prioritizing other personal needs, such as groceries and financial services.
Both Eddy and Ade agreed that in the short term the government should take immediate measures to shore up people's purchasing power, such as by accelerating government spending to finance various projects.
The Industry Ministry's director general for chemical, textile and miscellaneous industry, Harjanto, played down the layoffs, saying that the situation was only seasonal and solely affected producers that focused on the domestic market.
'This only happened in the first quarter. We hope there will be an improvement in the second quarter as the government disburses its budget, which can boost people's purchasing power,' he said, citing the disbursement of village funds that totaled Rp 20.7 trillion (US$1.57 million) as a factor to stimulate domestic consumption.
Separately, Manpower Minister Muhammad Hanif Dhakiri said he had learned about the layoffs from media reports and had asked the director general for industrial relations and social security to investigate the matter.
However, he said that as of Tuesday, the ministry still could not determine whether the layoffs indicated an alarming trend for workers.
'Our investigation will determine whether the layoffs can be considered an isolated case faced by particular companies or a problem faced by a certain industry, for example, labor intensive industries,' he told the Post after a meeting with the House of Representatives.
