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Sluggish manufacturing industry takes toll on tax receipts
The current weakness of Indonesia’s economy is weighing on state finances, as the manufacturing sector – the primary contributor to tax income – recorded negative growth in the first 10 months of this year.
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Female workers arrange garment products in a factory in Central Java. (Antara/Saptono)
The current weakness of Indonesia’s economy is weighing on state finances, as the manufacturing sector – the primary contributor to tax income – recorded negative growth in the first 10 months of this year.
Business players have confirmed that economic activity weakened throughout this year when compared to last year, which in turn has impacted state coffers.
Indonesian Footwear Association (Aprisindo) chairman Eddy Widjanarko said domestic footwear sales had dropped this year while labor costs had increased, particularly in Tangerang, Banten, one of the industry’s production centers in the country.
The recent increase in the minimum wage in Tangerang had forced around 20 shoe factories to relocate to Central Java, and more were expected to follow suit by the end of this year, said Eddy.
“Many factories in Banten have relocated to Central Java, while we are still in the phase of training the workforce there,” Eddy told The Jakarta Post over the phone on Tuesday.
Eddy, however, said exports to the United States had surged by around 11 percent this year amid the ongoing trade war between China and the United States, which has forced global supply chain adjustments around the world.
Despite the rise in shoe exports to the US, overall exports of footwear from January through September dropped to US$3.25 billion, down 12.86 percent from the same period last year, according to Trade Ministry data.
