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Waves of lay-offs sweep Indonesia's export-oriented industries in 2023

Jakarta Post - January 4, 2024

Jakarta – Despite earlier reports of declining unemployment and resilient growth, Indonesia's economy still took a hit from weaker global demand last year, leading to almost 300,000 workers being laid off in export-oriented industries.

The Manpower Ministry recorded that more than 295,000 people were laid off from January to November in 2023, with most of them located in West Java (36.1 percent) and Central Java (20.3 percent), as reported by Katadata.

Indonesian Employer Association (Apindo) labor affairs chair Bob Azam said the layoffs mostly occurred in the textile and footwear industries caused by weaker demand from Europe.

"It's problematic when an industry is only export-oriented. When the export demand weakens, workers are directly affected," Bob told Katadata.

The demand from Europe, Bob said, was reduced by 50 percent, while the companies that focus on Asian markets could still survive.

He added that provinces that relied on exports, like East Kalimantan for coal and Central Sulawesi for stainless steel, were also affected.

According to the ministry data, the number of people laid off in East Kalimantan was 5,986 people while in Central Sulawesi it was 7,059.

Indonesia showed resilience throughout 2023 with the economy growing at a slower rate of 4.94 percent in the third quarter.

Statistics Indonesia (BPS) reported in November that the country's unemployment rate dropped to 5.32 percent in August, a 0.54 percent decrease from the same month last year. The number of unemployed amounted to 7.86 million people.

About 147.71 million out of the 271 million population were part of the labor force in August, which means that the labor force participation rate amounted to 69.48 percent, the highest since records began in 1986.

There had been, however, signs of a struggle in manufacturing industry. S&P's purchasing managers' index (PMI) for Indonesia's manufacturing sector dropped from 52.3 in September to 51.5 in October, marking the lowest level since May.

The latest major layoffs came in the textile industry in Semarang, Central Java. Two textile plants are preparing to terminate about 5,000 workers, according to CNBC Indonesia. With the latest planned layoffs, the National Federation of Trade Unions (KSPN) recorded that at least 10 factories let staff go last year, with an estimated 12,000 people put out of work.

"Currently, layoffs are underway for hundreds of workers in a yarn and fabric factory in Semarang. [The company which owns the plant] supplies fabric and yarn to a garment company that is also part of the same group," KSPN president Ristadi told CNBC Indonesia on Dec. 29.

"This company is indeed conducting ongoing layoffs up to the present. So, there is no definite figure yet," Ristadi added.

Earlier, the KSPN reported the closure of another textile factory in West Java on Nov. 2.

The KSPN recorded that from 2022 to early 2023, the total number of layoffs in factories with KSPN members amounted to 56,976 individuals. This involves 36 companies across Semarang, Pekalongan, Sukoharjo, Magelang, Demak, Karanganyar, all in Central Java, as well as West Java and Banten provinces.

Ristadi further explained that, aside from weakening export demand, the layoffs were triggered by an influx of imported products eroding the domestic market.

He said the yarn and fabric factory in Semarang that recently let workers go was locally owned. However, it supplies to export-oriented factories whose orders have also declined. Meanwhile, the garment factory is a supplier to international brands, emphasizing its export orientation.

"We hope the government pays more attention to the textile, footwear and garment industries that employ millions of workers. These are labor-intensive sectors," he said.

Ristadi added that these companies also had problems implementing the minimum wage and other operational costs. He urged the government to take swift and concrete actions to safeguard export-oriented industries.

Source: https://asianews.network/waves-of-lay-offs-sweep-indonesias-export-oriented-industries-in-2023