Despite large profits, layoffs accelerate in Indonesia's textile sector amid coronavirus outbreak

Garment industry employees help make personal protective equipment in Jakarta on April 7, 2020.
Garment industry employees help make personal protective equipment in Jakarta on April 7, 2020.PHOTO: AFP

JAKARTA - The first round of layoffs came in March and involved 476 trainees who had been readying themselves for work at Nike supplier Victory Chingluh in the Tangerang industrial district outside Jakarta, just as Indonesia's first coronavirus infections emerged.

Then on May 4, there was another round of cuts involving almost 5,000 workers with a year or less experience at the company, bringing headcount at the firm to 17,000.

"Covid-19 is affecting everyone, not just in Indonesia," said Mr Suwandi Hekkindo, head of GSBI labour union, which represents 14,470 textile workers.

"We asked that management cut hours and overtime instead but they said the layoffs were unavoidable."

In the dog-eat-dog garment industry world, redundancies are accelerating. A million may already be out of work in Bangladesh.

Out of Cambodia's 700,000 or so garment industry workers, 100,000 could now be jobless.

Though cushioned somewhat by its massive domestic market, union officials in Indonesia fear employment in South-east Asia's largest textile industry, which is responsible for 4.2 million jobs, may implode.

Already the cuts have topped 63,000 since March. Tens of thousands more are in the offing this month alone.

"In a worst case scenario, 70 per cent of our membership could face layoffs," said Mr Ramidi, the general secretary of the Serikat Perkerjaan Nasional (SPN) labour union, which had more than 242,300 textile workers as at December.

Union leaders accuse contractors - the factories that make shoes, and shirts for Nike or H&M - of seizing on the crisis to offer cut-rate severance deals to help cut costs.

"The factories are using Covid-19 as an excuse to fire workers and move somewhere cheaper," said Mr Ramidi, who like many Indonesians, goes by a single name.

 
 

To be sure, the industry is competitive. The Victory Chingluh workers who lost their jobs were making 4.2 million rupiah (S$400) a month, triple the minimum wage in Bangladesh.

And wages are on the rise here. The minimum wage for textile workers rose an average of 8.5 per cent last year.

A Bill to reform the country's notoriously rigid labour laws, which make firing workers expensive and time-consuming is stuck in Parliament.

Victory Chingluh's payout includes three months in wages as well as payment in lieu of foregone religious holidays, Mr Suwandi said.

But after years of fat margins, big brands ought to stand by workers, said Mr David Welsh, country director of the South-east Asia branch of the Solidarity Centre, a non-profit aligned with the United States-based labour federation AFL-CIO (The American Federation of Labor and Congress of Industrial Organisations).

Even as Covid-19 stymied sales in China during the three months to February 29 this year, Nike managed gross profit margins of 44 per cent. At Swedish clothing brand H&M, the company's gross margins during the same period ticked up a percentage point to 51 per cent.

"We call on brands to step up during this time of crisis," Mr Welsh said.

"With the enormous profit margins they've enjoyed on the backs of workers in South-east Asia, they are easily placed to, at a minimum, sustain workers and factories over this period."

To be sure, some manufacturers are keeping their workers.

 
 

Panarub, which makes apparel for German sports brand Adidas at its factory also in Tangerang, has retained its 8,500 employees so far.

The company, which has not recorded any infections so far, staggers shifts, provides masks and takes other measures to cut the risk of contagion.

"As a Muslim, my life is in God's hands," said factory worker Sari Idayani, 45, an official with GSBI.

"But we can't just leave safety to chance. We have to be careful."

Other contractors are shedding employees. South Korean manufacturer Beesco, a contractor for Japanese athletic shoe brand Asics, is firing 2,000 of its 7,000 workers this month owing to a 40 per cent drop in orders, according to GSBI.

While the layoffs can be difficult for some, for others, the rare offer of lump sum cash payouts can prove too much to pass up.

Ms Wiwit Gustina, 36, divorced with two children and parents to support, said she used her 36 million rupiah payout to open a food stall in Jakarta selling sausages and meatball soup. She lives in Karawang near the Beesco factory. 

"I don't regret taking the severance," Ms Wiwit said. "Now I'm free and focused on earning money myself."