As of April 20, more than 2 million workers from 116,370 companies have been furloughed with unpaid leave or laid off as a result of the pandemic. Unfortunately, the Manpower Ministry data has not been disaggregated by industry sector.

In the Sukabumi regency of West Java alone, one of the centers of the textile and apparel industry, more than 6,500 workers from nine garment factories had been furloughed or laid off as of April 14.

Decreasing buyer demand has caused more uncertainty regarding the industry’s global supply chain. Although some international buyers and brands have committed to pay for orders that have been produced or are being produced, many brands have cancelled orders without payment guarantees, which have disproportionately burdened suppliers. To avoid lawsuits, many brands have invoked force majeure clauses, even though their contracts do not mention a pandemic as a reason to forgo their bills. This is very detrimental to suppliers. Indonesia is ranked among the top ten largest textile-producing countries.

The latest study of the Asia Floor Wage research group, The emperor has no clothes, reports that in supplier and producer countries in the global garment supply chain such as India, Bangladesh and Sri Lanka, brands and retailers are demanding a 30 percent discount. This is both unfair and irrational because under normal circumstances, brands and retailers gain the most profit in the garment supply chain. Profits have never really been shared proportionally with suppliers or workers in producing countries.

In addition, as the researchers add, current sales should not be used as an excuse to renegotiate the price of goods that will be shipped now or in the near future, given the uncertainty of consumer demand. This uncertainty significantly affects the finances of small and medium companies operating with thin profit margins and with low working capital.

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Under normal circumstances, brands and retailers gain the most profit in the garment supply chain.

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Several Indonesian suppliers, as stated by the Indonesian Textile Association (API), have sought to negotiate and urge brands and retailers to respect purchase contracts and obligations to pay for goods that have been produced or are in production. This is important for supplier companies so that they can maintain cash flow and pay obligations, especially to workers. If not, more layoffs or furloughs will be inevitable among supplier companies.

The API has requested that the government design a special package for the industry that includes financial support to overcome its hardships, from cuts in corporate income tax, reliefs in bank credit payments and electricity tariff incentives for industry, to suspension of premiums that employers must pay to the Workers’ Social Security Agency (BPJS Ketenagakerjaan).

The government has announced various economic policy packages for businesses and workers to alleviate the impacts of the pandemic. They have adopted a number of the requests. In addition, for workers, the preemployment card program provides access to online training. However, amid mass layoffs, what is needed is alternative income. The incentives for members of the program are only Rp 600,000 (US$40.63) per month, compared to their higher previous income and expenses for family needs.

Therefore, the government should consider reallocating the Rp 5.6 trillion from the training budget to direct cash assistance — especially in the month of Ramadan, when basic commodities generally experience price increases.

In the textile and apparel industry, the liability for protecting workers can be carried with joint responsibilities shared by companies, the government and brand holders. Sharing the contribution to ensure universal basic income for workers is one strategy to cushion the impact of COVID-19.

Some companies in Indonesia even pay workers below the minimum wage, leading to resistance from workers and trade unions. We are all in the same boat now, so we should bear this burden together to protect marginal groups, including factory floor workers. The workers’ wages can be subsidized by the government and brand holders.

For example, supplier companies could contribute 50 percent of workers’ wages, the government provides 20 percent subsidies and brand holders could contribute the remaining 30 percent. For this purpose, the government needs to provide support and, where necessary, facilitate the negotiation process involving suppliers and brand holders.

Another need is to provide social security contribution payments to four BPJS Ketenaga-kerjaan programs: work accident insurance, life insurance, old age insurance and pension insurance.

The total contribution should be 10.74 percent of wages, of which 7.74 percent is the responsibility of the company and 3 percent is borne by workers from their salary. For this purpose, the government can use the investment profit of the social security funds of BPJS Ketenagakerjaan. In 2019, the public institution managed to achieve an investment return of Rp 29.2 trillion, an increase of 6.9 percent year on year.

The 2011 law on the Social Security Organizing Agency states that the social security funds are used entirely for program development and for the maximum benefit of participants. Thus, in a critical pandemic situation, the government can utilize the returns of BP Jamsostek. Providing subsidies to companies and workers by waiving their contributions to BP Jamsostek over the next few months would ease the burden of businesses and workers during these uncertain times.

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Executive director, Trade Union Rights Center

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