Slamet Susanto, Yogyakarta – Higher production costs prompted by the government's decision to raise fuel prices on Oct. 1 have forced hundreds of handicraft producers in Yogyakarta to cut production by up to 40 percent.
Hundreds of others have had to halt all production and lay off workers because of a fall in orders in the wake of the Bali bombings in October.
The owner of a wooden batik handicraft workshop in Krebet, Bantul, Yogyakarta, Tugiyo, 35, said he had halted all production for the past three weeks because of a business slowdown. In normal times, he ships more than 80 percent of his products to Bali.
"Since the second Bali bombings, demand has dropped and I am just working now on filling old orders. We are in a difficult period now, with low demand and surging production costs because of the fuel price hike," the father of one told The Jakarta Post.
Before the fuel price increase and the bombings, his workshop produced a container of wooden batik products each week, earning a net profit of between Rp 4 million (US$400) and Rp 5 million. Now he cannot even afford to pay his employees. "I had to lay off most of the 300 workers here because of the sluggish business," said Tugiyo.
Riyadi, 42, a craftsman in Pajangan, Bantul, said most people involved in the handicraft industry has seen their profits drop by as much as 25 percent because of higher production costs since fuel prices went up. He said he used to make a 10 percent profit on annual turnover of Rp 300 million before the fuel price increases, but the rise in the price of raw materials had drastically reduced profit.
Riyadi said the price of sengon wood had gone up to between Rp 600,000 and Rp 800,000 a cubic meter, from Rp 400,000 to Rp 500,000. Other types of wood have also become more expensive, including klepu wood which now costs from Rp 700,000 to Rp 900,000 per cubic meter, up from Rp 600,000 to Rp 700,000.
An employee at the Peni batik workshop, Tati, 24, said it was impossible to raise prices to keep pace with the rising cost of raw materials. "It is because of people's lack of purchasing power. Consumers might be scared off if we increased prices," said Tati.
Some 60 leather craftsmen in Manding, Bantul, find themselves in a similar position. The high cost of raw materials and transportation has forced more than 20 craftsmen to stop production, while others are experiencing dropping profits.
"Monthly turnover used to reach Rp 40 million, from which I could pocket a profit of 10 percent to 20 percent. Now I am lucky just to stay afloat," said one leather handicraft producer, July.
There are thousands of craftsmen spread across Yogyakarta, including producers of bamboo handicrafts in Mlati, Sleman, pottery in Kasongan and Pundong (both in Bantul regency), and silver goods in Kotagede.
Most have experienced declining profits and many small-scale craftsmen have been forced to stop operating until the economic situation improves.