At the end of 2022, Indonesia lost more than 25,000 jobs in the footwear sector

08 February 2023

Indonesia posts 5.31% GDP growth in 2022, - reports the CNA news agency - , the highest in almost a decade. In contrast, thousands of workers in the footwear industry in Tangerang, Banten, were laid off in the last quarter of last year. The president general of the Indonesian Footwear Association (Aprisindo) Eddy Widjanarko had already declared in November that the number of workers laid off in the footwear sector had reached 25,700. [Ribuan Pekerja of Industri Sepatu Tangerang Kena PHK ... -]



The president of the Dewan Pimpinan Cabang (DPC) division of the Indonesian Confederation of Trade Unions (KSPSI) Jumhur Hidayat section, Tangerang regency, Rustam Effendi, confirmed the recent news about the Banten region: "It is true that PT Adis Dimension Footwear laid off between 8,000 and 11,000 workers, then PT KMK Global Sport 1 laid off 11,000 and then another 7,000. Now, PT KMK Global Sport 2, has shut down production laying off all 4,000 workers. »

Most of these companies are those that produce Nike shoes. In total, the number of workers most recently laid off was 11,000 in the second half of 2022. "2023 should be normal," Rustam explained.

In addition, Eddy explained that the decision to lay off would be made due to the drop in orders from some of the largest shoe manufacturers from abroad. He gave an example of three international brands, such as Nike, Reebok and Adidas, which saw order cuts of up to 50% compared to normal conditions because these companies were experiencing sales difficulties.

"During our meeting with the people at Nike, Reebok and Adidas, they said that in 30 years of business, they had never had sales difficulties before this year," Eddy said at a virtual press conference last November.

Anton Supit, a member of the foundation board of Aprisindo, also explained the same thing. He explained the reasons for the layoffs of thousands of workers in the footwear industry in Tangerang.

"Because their orders have decreased, we cannot hold them back. For shoes, orders have dropped dramatically," Anton said when contacted by Tempo on Thursday, February 2, 2023.

When asked about business volumes, he said he knew nothing. If demand drops dramatically, many workers will have to be laid off.

He also confirmed that the layoffs were not carried out by a single company. There are several companies that have laid off due to similar problems. However, he stressed that the problem should only be temporary and would not agree with the country's macroeconomic performance.

Indeed, Indonesia’s economy grew 5.31 per cent in 2022, the highest in almost a decade, marking a return to its growth patterns before the COVID-19 pandemic. 

Announcing the 2022 growth figures on Monday (Feb 6), head of the statistics agency Margo Yuwono said that last year’s growth was the highest since 2013 when it was about 5.7 per cent. 

Last year’s growth is significantly higher than 2021 which recorded a growth of 3.69 per cent due to global and domestic factors, said Mr Yuwono. 

“Globally, Indonesia benefits from the relatively high prices of leading export commodities in the global market,” said Mr Yuwono. 

He added that on the domestic front, growth was contributed by a combination of increasingly vibrant public activities and a mix of fiscal and monetary policies to maintain purchasing power. 

The loosening of COVID-19 restrictions is believed to have played a crucial role in the increase of people’s economic activities, he said. 

The growth is in line with the projection by the Indonesian central bank of between 4.7 per cent to 5.5 per cent for 2022. 

The quarterly GDP figures for Indonesia showed that the Southeast Asia’s biggest economy grew by 5.01 per cent in the final quarter, a decrease compared to 5.72 per cent in the third quarter of 2022.  

According to the statistics agency, household consumption remains a major contributor to the economy accounting for more than half of the GDP at 51.87 per cent. 

Major leading sectors driving the economy last year included manufacturing, trade, agriculture and mining, while sectors that saw the highest growth were transportation, warehousing as well as food and beverages. 

The sectors grew between 14 per cent and 17 per cent year on year largely due to the loosening of movement restrictions imposed due to the COVID-19 pandemic.  

The curbs were partially lifted in the second quarter of 2022 and they were completely lifted by the end of the year. 

Jakarta-based economist Bhima Yudhistira said that last year’s growth seems high due to a low base effect, as a result of the pandemic followed by more active economic activities as the movement restrictions were lifted. 

"If we compare the situation to 2021, there were still restrictions. Then in 2022 things were looser, so there was an increase (of activity) in the transportation, hotel, and restaurant sectors and this can be said to be the return to pre-pandemic life,” said the economist from the Center of Economic and Law Studies (CELIOS). 

He also attributed the Russia-Ukraine war, which started in Feb 2022, as having a positive impact on the Indonesian economy because of the commodity boom due to higher demands for the country’s commodities. 

In terms of geographical location, the island of Java is the main contributor to growth in Indonesia accounting for 56.48 per cent followed by Sumatra at 22.04 per cent. 

Eastern provinces such as those in Maluku and Papua record the lowest contribution at 2.5 per cent but mark the highest growth at 8.65 per cent. Java’s growth is 5.31 per cent while Sumatra’s is 4.69 per cent.

Mr Yudhistira noted that the eastern provinces could continue to grow and make bigger contributions in 2023.  

“But they need to diversify such as (by going into) manufacturing and digital sectors,” he told CNA. Non-Java regions are primarily reliant on commodities and tourism as their main economic activities.   

The economist, however, predicted that this year Indonesia is likely to undergo slower economic growth due to global situations which could see higher inflation and interest rates. 

Indonesia’s central bank has projected the country’s economy to grow between 4.5 per cent to 5.3 per cent this year.


Paese: Indonesia
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