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."