Companies

Indonesian footwear industry hit by a lay-off wave

May 30, 2024 Indonesia

The recent closure of PT Shoes Bata Tbk, a subsidiary of footwear company Bata, with the lay-off of 233 people, has highlighted a wave of redundancies that has hit the Indonesian footwear industry

As the Indonesian economy recovers, the footwear industry faces a set of difficulties that are preventing it from fully recovering from the COVID-19 pandemic and the global economic slowdown. The sector is grappling with ongoing lay-offs because of weakened demand in export markets due to global economic pressures. The domestic market is also under pressure from an influx of imported products.

Operating in Indonesia since 1931, Bata’s subsidiary closed its doors at a loss in each of the four years following the pandemic. According to Shinta Kamdani, president of the Indonesian Employers Association (Apindo), the closure was influenced by geopolitical factors such as the conflict in the Middle East, as well as factors that caused the rupiah exchange rate to weaken and the share index on the Jakarta Stock Exchange to fall.

Besco Indonesia, a shoe manufacturer based in Karawang Regency, West Java, also ceased operations, resulting in the lay-off of 4 000 workers. Dean Shoes PT, a shoe manufacturer based in the same Regency that produced Nike and Under Armour branded shoes for the mid-market, followed the same path. The manufacturer ceased operations in April, resulting in 3 500 redundancies (laconceria.it).

A spokesman for Dean Shoes said at the time that the global economic uncertainty caused by the Russia-Ukraine war had led to a drop in orders. However, he added that the minimum wage in the regency had increased, so investors were “looking for cheaper production locations to ensure more sustainable operations” (kompas.id), highlighting another challenge: rather than leaving Indonesia altogether, some companies are moving production to the Mid-Java region, where labour costs are lower.

“Indonesia remains competitive for shoe production”, stated Eddy Widjanarko, president of Aprisindo, the Indonesian footwear association, to La Conceria But many shoe factories have moved and are moving their factories to Mid Java (in the centre of the island of Java) because the cost of labour is exactly half of what it is in other areas (West and East Java): 200 USD per month compared to 400 USD. All the factories of big brands, such as Nike and Adidas, have already moved to Mid Java”, he concluded.

The Indonesian textile and clothing industry also faces similar hurdles.

Image Credits: Nick Agus Arya on Unsplash

Indonesia Bata Companies Economy Employment Footwear Manufacturing