The national footwear industry will again face another wave of mass layoffs (PHK) in the first semester of 2023, due to a drop in export demand of up to 40-50%. At the end of last year, this labor-intensive industry laid off 25,700 workers due to a decline in export orders. The low incoming orders will have an impact on lowering footwear exports this year. "Initially I suspected layoffs would take place in the first quarter of 2023, but export demand has not improved. There has been no good news, including the economy for the export destination of the footwear industry, so the wave of layoffs is likely to continue for the next six months," said the Executive Director of the Association. Indonesian Shoe Association (Aprisindo) Word, recently.
He explained, the decline in orders had started to be felt since July 2022, but last year's export realization still grew high. Realized footwear exports grew by around 25.2%, to around US$ 7.7 billion.
“Export growth is actually quite extraordinary. However, in 2022 we have actually started to experience a decline in orders," said Firman.
Main market sluggishness
Firman explained, in December, the decline in exports had started to be seen. "Our estimate is that in the first and second quarters of 2023, orders will probably drop by around 40-50%. We don't dare to estimate how many exports this year will be, we are waiting for the first semester to see what the results will be," said Firman.
He said the decline in export orders came from major markets such as the United States. Even if there are conditions that have improved like the US, they are still not fully recovered.
According to Firman, the lack of orders has not forced footwear factories to close. However, most industries have implemented efficiencies because the incoming orders are very small.
He hopes that the government will have special policies that are temporary and fast in nature to save the footwear industry, as was done during the Covid-19 pandemic. When a pandemic occurred, the government's reaction was quite fast by holding weekly meetings and issuing policies needed by the industry.
"Even though it was late, we have had quite an extraordinary success in handling the pandemic. However, when it comes to current conditions, it is not as responsive as it used to be," said Firman.
Need Government Role
Firman stressed the importance of the government's role to save the footwear industry and prevent the spread of layoffs in labor-intensive industries. He regretted that there was still debate about whether there were layoffs amid the current conditions.
In fact, the government has data that comes from reports from ambassadors and trade attaches abroad regarding economic conditions in export destination countries. There is also analysis from the news in the international media regarding reports that global brands are starting to reduce their production capacity.
"Then, in the news in competing countries such as Vietnam, there will also be layoffs in 2022. Data on the activity of going in and out of our goods at the average factory is in bonded zones and everything is recorded at Customs. This means that there should be an early warning system, because the data can change day by day," he said.
Firman added, the government also has layoff figures from two data. First, data that is a report from the factory to the level II service, which is continued to the province and then to the ministry. Second, data from Employment BPJS.
“Both of them have different methodologies. I think there is already a lot of data, and then economic experts have said that the condition of our export destination countries is experiencing a slowdown," he said.
Firman said that since last year his party hoped there would be flexibility in order to suppress layoffs. The proposal has been included as a recommendation by the Ministry of Industry (Kemenperin).
"But that goes back to the Ministry of Manpower. All the data already exists, all that's left is the political will from the Ministry of Manpower," he said.