BULETIN TEKSTIL.COM/ Jakarta- The West Java Textile Entrepreneurs Association (PPTPJB) reported that since two weeks ago, 64,000 workers had been laid off from 124 companies in 14 districts and cities in West Java.
“This situation is more severe than Covid-19. During Covid-19, we only can’t ship but we have a market. Meanwhile, this time the market is unpredictable,” General Chairperson of PPTPJB, Yan Mei, said in a virtual press conference on Wednesday, November 2, 2022.
The layoffs occurred due to a decline in consumer purchasing power, especially in the largest export destination countries such as the United States and Europe.
Yan Mei said that at her own factory, located in Bogor Regency, there has been a 50 percent decline in orders since April 2022.
The situation became more difficult in the following months, orders destabilized until they fell by as much as 70 percent.
So far, 18 textile companies have closed which resulted in the termination of around 9,500 employees. This figure is expected to continue to grow as new reports come in.
The unpredictable geopolitical situation between Russia and Ukraine has also caused logistical disruptions to international food supplies.
As a result, food inflation can continue to soar and make people prioritize food spending as a basic need rather than spending on textile products.
“This situation will take many victims. For that, we hope that the government can relax, whether from BPJS (Social Security Administering Agency) or anything that can be considered, ” Yan Mei said.
If food inflation goes out of control, he is worried that the decline in purchasing power will deepen and layoffs will continue to occur. If the layoffs continue, the company will have more difficulty in carrying out the production process.
Therefore, he hopes that the government will immediately implement policies so that the textile industry can be safe.
“We must continue to speak to the government, asking to find the best solution for the current situation,” he said.
Yan also noted that the decline in exports also occurred in large companies such as Nike, Victoria Secret, and others. In fact, the rate of decline has now reached 40-50 percent.
Meanwhile, the Head of Public Policy of the Indonesian Employers’ Association (Apindo) Danang Girindrawardana responded to the news of mass layoffs in the textile industry sector.
He admitted that he could not explain the total number of employees who were laid off.
“We are still waiting for data on the number (of employees affected by layoffs) from Apindo members and related associations,” said Danang.
Meanwhile, the President of the Confederation of Indonesian Worker Unions (KSPI) Said Iqbal denied the issue of layoffs of 45,000 workers in the textile, garment, shoe, and automotive industries. This issue coincides with the threat of a recession next year.
Said Iqbal considers the threat of recession used by a number of entrepreneurs to take advantage. The so-called ‘black businessman’ used the recession as an excuse not to raise wages.
Minister of Finance’s Response to Mass Layoffs in the Textile Industry
The Minister of Finance, Sri Mulyani Indrawati, acknowledged that Indonesia’s export performance was affected by the global economic turmoil. As a result, the decline in export demand began to have an impact on layoffs in the textile industry.
The weakening of exports was also reflected in data from Indonesia’s Manufacturing Purchasing Managers’ Index (PMI), which was at the level of 51.8 in October 2022.
Although this level indicates that the manufacturing sector is still in an expansionary stage, it has decreased compared to September of 53.7.
“Our manufacturing is still above the expansion zone, although lower than in September. We estimate that in terms of export demand, there will be an impact with the possibility of weakness in developed countries,” the Minister said.
Therefore, the government seeks to encourage state spending in the fourth quarter to increase domestic demand. However, she did not deny that all falling foreign demand could be fully substituted with domestic demand.
“However, we will compensate for requests that cannot be substituted. We will continue to see from all these sectors and then what policies need to be formulated further in response to global trends,” he explained.
For information, state spending as of September 2022 has only reached Rp. 1,913.9 trillion or 61.6% of the budget allocation.
Sri Mulyani explained that fiscal policy is indeed aimed at spending the determined allocation. So we hope that it can support domestic demand at a time when global economic demand weakens.
“The existence of high inflation and a strengthening exchange rate will of course also cause changes in the performance of the economies in Europe, America and China,” explained Sri Mulyani.