The recent announcement of increase in wages by the Indonesian Government will mar the competitiveness of the country’s garment sector, according to the Indonesian Textile Association (API).
The association said that the wage hike would result in increased imports of garments as local manufacturers would lose their competitiveness.
API estimates Indonesia would import clothing items worth Rp 55 trillion this year and it forecasts the value to grow by 36 percent year-on-year to Rp 75 trillion next year, owing to the hike in cost of labour.
When the new wage structure comes into effect, the minimum wage in Jakarta would increase by 44 percent over the existing wage to Rp 2.2 million per month, which is Rp 220,000 more than the minimum wage sought by the Indonesian Employers’ Association Apindo.
Earlier, the minimum wage in the West Javanese city of Bekasi was raised to Rp 2.1 million per month from Rp 1.4 million.
Both Jakarta and Bekasi have several apparel units, employing millions of people.
According to API, average domestic apparel consumption is likely to rise this year to about 7 kg per person from last year’s 6.5 kg. However, it expects the total sales value of apparels to remain flat at Rp 95 trillion, pointing to a decline in price of garments.