Global Economic Pressure, Not Gas Prices, Behind Industrial Layoffs
The threat of layoffs in the industrial sector is not solely triggered by rising prices or the supply of natural gas. The government assesses that the current pressure on the business world stems from a combination of factors, ranging from geopolitical conflict in the Middle East, weakening public purchasing power, the depreciation of the rupiah, to the relocation of investments to other countries.
Special Advisor to the President for Employment and Worker Welfare, Said Iqbal, stated that the government continues to implement various mitigation measures to prevent layoffs from spreading further in the industrial sector. According to him, the problems faced by the business world are far more complex than just the issue of energy prices.
‘The Middle East conflict has caused an increase in industrial fuel and non-subsidised gas prices. Then, public purchasing power has declined, causing company production volumes to fall. On the other hand, there is a relocation of some production to other countries and a weakening of the rupiah, which increases production costs. So, indeed, many factors are affecting the current industrial conditions,’ Said Iqbal said during a press conference.
Said also clarified information regarding a wave of layoffs said to have reached around 55,000 workers. According to him, the government is still verifying various cases occurring in the field, as not all of them constitute new layoffs. ‘We are conducting mitigation efforts in various companies so that layoffs can be suppressed as much as possible. Not all circulating information reflects the real conditions on the ground,’ he said.
He cited mitigation efforts at several companies, such as the Yazaki Group, which successfully reduced its production relocation plan to Vietnam through bipartite negotiations, so that workforce reductions were directed gradually through the expiration of employment contracts. The government is also overseeing the resolution of cases at PT Pakerin, PT Molex Ayus, and several other companies to ensure workers’ rights are fulfilled.
Meanwhile, ReforMiner Institute Executive Director Komaidi Notonegoro assessed that gas prices are only one component in the industrial production cost structure, making it inaccurate to single them out as the cause of weakening competitiveness or the rising threat of layoffs. ‘National industrial competitiveness is determined by about 15 factors. Cost competitiveness through gas prices is just one component. The factors that are more decisive are industrial strategy, market demand, and resource elements,’ the ReforMiner study noted.
Komaidi explained that based on 2025 data from the Central Statistics Agency (BPS), the portion of fuel costs, including gas, lubricants, and electricity, in the industrial input cost structure is only around 6.35 percent. In contrast, the largest component comes from raw and auxiliary materials, with a share ranging from 64.60 percent to 96.76 percent, depending on the type of industry.
According to him, this condition shows that the issue of industrial competitiveness cannot be resolved solely by lowering gas prices. The government needs to strengthen industrial strategy, maintain market demand, improve supply chain efficiency, and ensure the availability of raw materials for the manufacturing sector. ReforMiner also noted that not all industries receiving the Specific Natural Gas Price (HGBT) are highly dependent on gas costs. The portion of gas costs in the oleochemical industry is only about 3.3 percent, in the rubber glove industry around 7-14 percent, and in the glass industry about 16 percent of total production costs.
Therefore, Komaidi assessed that the government needs to consider various aspects before setting gas price policies. Besides evaluating the HGBT allocation, the government could also increase pipeline gas supply to reduce dependence on LNG, provide flexibility for industries while global LNG prices remain high, and consider providing direct tax incentives, which are deemed more effective in maintaining the competitiveness of national industries.