9,000 workers may be laid off in three months in Indonesia, labor union warns

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A labor union leader has warned that massive layoffs may occur in the next three months on account of skyrocketing production costs due to the Middle East conflict, forcing manufacturing companies across Java in Indonesia to downsize or close operations permanently.

Indonesian Trade Union Confederation President Said Iqbal said in a news conference on May 25 that the cost-cutting measures could potentially affect 9,000 workers in 10 companies in Banten, West Java, Central Java and East Java.

Said, who is also the chairman of the Indonesian Labour Party, said the driving factor is the war between the United States, Israel and Iran, which has no certainty about when it will end, causing prices of fuel to surge.

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The number was an approximation of the reports from the union members who were issued an early warning about the layoffs, he noted.

Said said that the fuels the industry used were not subsidized and that their prices started to increase in May. Thus, many companies will be forced to axe workers within the next three months.

The companies also struggled with raw materials they had to import, which became more expensive not only because of rising international logistics costs due to the rising fuel prices, but also due to the weakening of rupiah against the US dollar.

International trade is mostly conducted in dollars but transactions in Indonesia are conducted in rupiah and when the latter weakens, the industry has to spend more just to import.

The Indonesian currency has been on a downward slope since the first missiles were fired on Feb 28 and has traded at its record low of around 17,700 rupiahs per dollar for the past week, far below the 16,700 to 16,800 rupiahs range before the war began.

War impact

One company that has fallen victim to the war is PT Xacti Indonesia, formerly known as Sanyo. The company, which has been axing workers since last year due to financial hardships, was forced to close shop permanently this month, three months into the war.

Located in Depok, West Java, Xacti has laid off 350 workers, officially ending its production of digital imaging devices, electronic components and printed circuit boards.

Said did not name all 10 companies that are about to slash the number of workers but mentioned companies including PT Lung Cheong Brothers Industrial and PT Parkland World Indonesia which fired workers this month, both manufacturers of footwear and textile products.

He then said that "even big companies like" PT Nikomas Gemilang in Serang, Banten, had axed 279 of its workers, "but the number of its workers is still large, still in the tens of thousands".

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Said went on to say that Karawang, a manufacturing hub in West Java, alone had recently laid off a total of 1,323 workers.

The wave had also affected the automobile industry in Central and East Java, particularly in showroom and repair shop businesses "due to low car demand and weakening of people's spending power" and, likewise, expensive component imports, said Said.

He also noted that some companies would "surely" close operations within the next few months because "they are losing competitiveness".