Indonesia clothing hub will take time to recover from pandemic
Indonesia's clothing industry is another sourcing hub that has been struggling duringthe Covid-19 pandemic, with overseas buyers cancelling orders and the domesticmarket in the doldrums.
Since the pandemic, many buvers in foreign countries, mostly the United States and Europe, have cancelled or postponed orders because ofockdowns and other reasons." says Rizal Rakhman. secretary ceneral of the lndonesian Textile Association (AP1 --Asosiasi Pertekstilanndonesia)
The domestic market has also been depressed, with stores, modern shopping malls and garment sales centres, including the famous TanahAbang market in Jakarta, ordered to close to observe social distancing restrictions imposed by the goverment on 10 April
civen the creater Jakarta recion is home to about 30 milion peole. t is no surprise that domestic sales that help indonesian manufacturers
maintain capacity have plummeted.The restrictions are affectina the carment sector areaty. When shons are closed. they don't order from manufacturers and can't pav becausethere are no sales" Rakhman adds. "Many people also are not buving clothing because they have lost their income and have switched
priorities to food and other essentials."Seasonal sales have been harmed too - the Eid al-Fitr Muslim festival at the end of the holy month of Ramadan usually sees revellers splurgeon new clothing, but not this year, Rakhman says.
Huge industry has been hobbled
With exports collapsing, a huge industry has been hobbled. in 2019, Indonesian clothing exports were valued at US$8.3bn, down slightly fromUS$8.62bn in 2018, according to the ministry of industry. The Us accounts for nearly half of that value, according to ministry data.Even though clothing and textile factories in lndonesia have been allowed to continue operating, as long as workers practice social distancincand wear face masks, they have litle revenue, and they are stll being required to pay electricity minimum usage fees, pay loan interest to thebanks and pay employees.
'As a result, many workers have been furloughed because that's the only rational option," Rakhman saysHe declines to reveal how many garment and textile workers had been laid off, but the government has said that across indonesia, since theCovid-19 crisis hit, nearly 2 million workers, including those in informal sectors, have lost their jobs and daily incomes.According to Rakhman. businesses have called for the goverment to subsidise 50% of their electricity bills. but there has been no responseThat said. the goverment has acted in other ways. n March t revealed tax breaks worth USS1.4bn, primarily for the manufacturing industryncluding the textile and clothing sector. lt also announced it woud reduce corporate income tax by 30% in 19 selected manufacturing industriesfor the next six months it added another 11 sectors in Apri) -- which includes the clothing and textile industry.But the API secretary general warns that regardless, if the pandemic drags on, many businesses will be forced to close
ime to recover
Redma Wirawasta, secretary general of the lndonesia Fiber & Filament Ya Producers Association (APSyFl), says it will take time for thesector to recover after the pandemic, as countries are expected to raise tarifts to protect domestic businesses as the virus subsides. "Our hope
is the domestic market, but no one's buying at the moment.Redma says lndonesians buy 2 miion tonnes of garments annually, while exports account for 500,000 tonnes a yearlis Masitoh, the industry ministry's director for textile, eather and footwear industries. savs the covemment estimates that exports of textlesand clothing have dropped as much as 30% percent in the first semester due to the pandemic.
Domestic sales of textles and clothing slumped by up to 60% due to travel restrictions and closure of shopping centres, she says. Online sales
only account for about 5-10% of turnover, making it tough for clothing retailers and brands to maintain incomeOn the supply side, itextile and clothing manufacturers are currently operating at about 50% of capacity," she told just-style. "A few companies
are completely closed because there are no orders.Despite this, Elis claims there have yet been massive lay-ofis in the garment sector during the pandemic, but did not provide numbers. "Thererave been lavofis. but they were araely not due to Covid.19 but relocatons. Some companies are suspending workers. but there have been mlarge-scale dismissals."
in April, the Better Work initiative - a joint proaramme of the lntenational L abour Orcanization ( O) and the ntemational Finance Corporationa member of the World Bank Group - reported that more than 65 export oriented garment factories enroled in the Better Work indonesiaprogramme were temporary closed due to social restriction orders or as a result of canceled or suspended orders from buvers. Factories inDK1 Jakarta Banten, West Java, Central Java and Joqjakarta were all affected, with around 100,000 workers impacted. Factories had alsoadapted production lines to produce personal protective equipment.