Job outlook bleak for factory outlet town Bandung

Job outlook bleak for factory outlet town Bandung

Peter Janssen Deutsche Presse-Agentur Bandung

This town, where founding president Sukarno staged the historic Asia-Africa conference in 1955 and spawned the Non-Aligned Movement, is best known today for its factory outlet shops selling cheap garments and shoes.

Every weekend Jl. Cihampelas or "Jeans Street," where factory outlet stores advertise themselves with giant plaster figures of Batman, Superman, Spiderman, King Kong and Rambo, is packed with bargain hunters from nearby Jakarta, a three-hour car drive away - drawn to West Java's capital for its cooler climate and hot deals.

What many shoppers don't realize is that nowadays Bandung's factory outlets are increasingly stocked with imported goods from China, Thailand and Malaysia instead of from Bandung's own factories.

"At first the outlets started importing goods to keep up with demand, but now it's also because China makes better quality, cheaper stuff and has the latest fashions to boot," said one Bandung-based garment merchant, who asked to remain anonymous. Bandung's textile and garment export industry took off between the early 1980s to mid-1990s, after which the sector began to lose competitiveness to other countries.

With the Asian financial crisis in 1997, even though Indonesian textiles regained some price competitiveness because of the devaluation of the rupiah, many international buyers were scared away from Indonesia by the political and social unrest that swept the country in 1998 and have moved their trade elsewhere.

Prospects for Bandung's textile/garment exports over the next two years are even grimmer as the end of the Multifiber Arrangement (MFA), which sets quotas on textile and garment imports to the U.S. and the European Union, nears its phase-out deadline on January 1, 2005.

China and India are expected to be the big winners in the post-MFA quota-free market.

According to projections made by the U.S. International Trade Commission, China's share of the global apparel market is expected to grow from 30 percent in 2004 to 36 percent in 2010, while South Asia's share will jump from 10 per cent to 19 percent, in the same period.

Indonesia is expected to be one of the countries that will lose out.

"A lot of Indonesian textile factories now are just importing," said Sofyan Wanandi, president of the Indonesian Employers' Association (Apindo).

"They import from China where it's made cheaper and they sell it here under their own brand."

Indonesia was still a significant exporter of textiles and garments in 2002, when the sector earned the country US$7 billion, but earnings are in decline. In 2001 the country earned $7.7 billion from textile and garment exports and in 2000 its was 8.3 billion.

More than half of Indonesia's textile/garment exports were under current MFA quota system applied on imports to the U.S. and EU which will disappear next year.

"When the quotas end with the MFA, that's another 150,000 to 200,000 jobs lost," predicted Wanandi.

The Indonesian Textile Association (API) recently forecast that 50,000 laborers would lose their jobs in West Java this year alone.

Ironically, the demise of the textile and garment industry comes at a time when the country has won praise for labor rights. Indonesia, which had one of Asia's worst labour rights records during the 32-year rule of autocratic president Suharto (1966- 1998), has become the first Asian country to ratify all eight of the International Labor Organization (ILO) core conventions, and last year pushed through two new laws on manpower rights and industrial dispute settlements.

Unfortunately, improved labor rights have not stopped production from moving elsewhere.

"The labor union helped me a lot, but in the end they couldn't help the factory survive," said Erlin Mulyani, 22, a former employee at Bandung's Maju Mustika Garment Company, now defunct.

Mulyani, who was laid off in August 2002, was lucky to receive four months severance pay from her employer, which she used to go back to school. Thousands of other laid-off Bandung factory employees have been less fortunate.

Bandung-based foreign trading agents, the essential middlemen who make the orders and supervise deliveries for the huge retail outlets in the U.S. and Europe, are also feeling the pinch.

"We're starting to look for something else to do from next year onwards," said Justin Mollison, director of the Abacus Trading and Export Agency.

Mollison, who has been sourcing garments from Bandung factories for Germany's Aldi retail stores for years, admitted that whatever price edge Bandung garments once enjoyed will disappear with the MFA.

"China is like a big vacuum sucking up the business," said Mollison. "Without the quotas, China's garments will be 20 percent to 30 percent cheaper than Bandung's."