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Indonesia: Textile Producers Could Be Forced to Layoff More Workers

In the face of weak sales and rising production costs, textile producers in Indonesia are encouraging the government to step in and help the industry. If it doesn’t, businesses could be forced to close or layoff more workers.

While the country is facing an economic slowdown, the textile industry is being challenged by flat growth, and several companies have already begun dismissing workers, Indonesian Textile Association (API) chairman Ade Sudrajat, told the Jakarta Post.

Sudrajat said his business group filed a report with the Industry Ministry about the recent dismissal of tens of thousands of workers at textile factories across Java because of this economic pressure.

“Based on our report given to the Industry Ministry, there are at least 6,000 textile factory workers who have been dismissed in four districts in Bandung regency between January and May,” Ade said at a textile exhibition in Jakarta on Wednesday, according to the Post.

The company previously reported that 120 textile factories in Bandung Regency, located in West Java, laid off at least 6,300 workers and cut working time from seven days to just three because of the weak sales—which dropped by more than 40 percent in the January to April period compared to the same time last year.

Sudrajat said rising costs, specifically in electricity, have hurt the local textile industry, which is also facing pressures from the weakened value of the rupiah.

Bank Indonesia reported the country’s economy slowed to 4.71% year-on-year growth in the first quarter of 2015, down from the previous quarter at 5.02%. This slowdown is owed in part to low domestic consumption and weak exports.

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The bank estimates economic growth will start to increase during the second quarter of this year.

Sudrajat said his business group requested that related ministries and state firms absorb production, as a quick way to help the industry.

For example, “many textile companies in West Java produced sarongs, which are often in high demand during Ramadhan and Idul Fitri festivities,” Sudrajat told the Post.

The association was convinced that the Social Affairs Ministry would be able to absorb the products and use them for various purposes, such as charities, he noted.

West Java is Indonesia’s largest textile producer with 49 percent of the country’s textiles, according to Sudrajat. Jakarta and Banten contribute 16 percent, Central and East Java provide 14 percent each and the remaining 3 percent comes from other areas.

“In the medium term, the government should find a solution for how to decrease electricity costs, or else we cannot compete with imported products. We also hope that government spending, especially for infrastructure and villages, can be accelerated for disbursement,” Sudrajat added.