5. Indonesia

INDONESIA

Chapter Highlights

• Our survey estimates indicate that 81,633 garment workers across 28 factories in Indonesia were denied 20.02 million USD as wages due to order cancellations, non-payment, and other irresponsible practices by brands in 2020.

• 72% of the workers suffered employment shocks either in the form of layoffs (64%) or terminations (8%).

• As their wages dipped, workers in Indonesia reduced their consumption by 10%, which did not recover by the end of the year.

• 70% of the workers reported that they incurred debt during the pandemic period to finance their consumption.

• Workers who were already living below the international poverty line (measured at 5.5 USD PPP) in the pre-pandemic period were pushed into deeper poverty during the crisis.

• 78% of the workers were barely surviving below the international poverty line during the peak months of May, June, and July.

Section 1: Introduction

Indonesia was one of the Southeast Asian countries worst affected by the Covid-19 pandemic in 2020, reporting high rates of infection and related deaths. As a response, the government implemented partial and regional lockdowns through the policy of “Large Scale Social Restrictions” (locally referred to as Pembatasan Sosial Berskala Besar or “PSBB”). According to the government, this was in contrast to a total lockdown, which would hurt economic activity and create instability in the economy. However, the implementation of the PSBB in several provinces, regencies and cities had a negative impact on Indonesia’s garment industry and its workforce, as factories were not allowed to operate without permits and workers faced barriers in reporting to work.

In addition to this, disruptions in the supply of raw materials from China further worsened the situation, as the industry depends on imports of anywhere between 20-50% of its inputs from China.1 The contraction of demand in foreign consumer markets – US, Middle East, EU, and China – as they faced Covid-19 lockdowns, further worsened the crisis. Cancellations of orders, reduction in new orders, delayed payments and demands for discounts by fashion brands had adverse effects on Indonesia’s garment industry as exports accounts for 70% of garment manufacturing in the country.2