Indonesia’s 2020 GDP is around 1.058 USD billion, with the manufacturing sector generating 20.61% of the GDP. The textile and garment sector accounts for 11% of manufacturing exports, and 5% of total exports and employs some 4.3 million people. In addition, the garment and textile industry continued to become an essential source of formal employment for Indonesian women, with the female labour force participation rate in the garment sector accounting for 82% in 2017. Foreign investment has been a primary driver of garment manufacturing in Indonesia which mostly come from South Korea.
In 2019, the largest export value of the garment and textile industry from Indonesia was to the United States, which amounted to approximately 4.8 billion USD. The number dropped in 2020 due to the COVID-19 pandemic, with some stated drop of 51% to the US market and showing that the number still amounted to approximately 3.6 billion USD. The second biggest destination of exports from the garment sector in Indonesia is Japan, with total exports of 1.3 billion USD in 2019 and dropping to 732 million USD in 2020. While the third biggest destination of garment export in 2019 in China with a total number of 770 million USD63, the third place was changed to Germany in 2020 with total exports of 379.3 USD, since export in China dropped to only 192 million USD in 2020. According to Statistic Indonesia, there were as many as 2.389 large and medium enterprises involved in the garment sector in 2019 and 583.565 small and micro enterprises in 2015. Although statistics are not readily available on the proportion of these involved in export production, it can be expected that a significant proportion of large and medium enterprises are in some way involved in international supply chains. The vast majority of textile and garment factories are located on the island of Java. The garment industry is particularly concentrated in West Java, Central Java, East Java, and Banten. Together, these regions accounted for more than 85% of all garment, textile and footwear employment in 2016. Garments can be categorized as labour-intensive industries and are easy to be relocated. Relocation is carried out by the employers to the areas with low minimum wages, for example, to relocate the factories from Jakarta to Central Java.
Conditions in garment factories vary widely across Indonesia. They are generally much worse in medium and small-sized factories, which do not attract the same kinds of scrutiny as large factories that produce garments for international brands. In recent years, the industry has received a great deal of attention from international and local NGOs and trade unions, with a range of private initiatives, such as Better Work Indonesia, the Freedom of Association Protocol (FoA) and the Asia Floor Wage, taking action to improve working conditions in garment factories.
There is still, however, much work to be done in factories of Fair Wear suppliers across the country. Price competition is driving many factories to move to areas with lower minimum wage requirements, which is pushing wages down across the industry. The government is not enforcing existing laws on freedom of association, overtime, and legal employment contracts, and there’s a pressing need for better health and safety standards across the board. Workers in garment factories across the country report experiences of workplace violence and sexual harassment.
One key element of the work in Indonesia is the Gender Network Platform, an initiative launched in 2017. This platform brings together trade unions, international organisations, ministries and the country’s National Women Rights Commission to work on gender issues. Its first goals are to push the government to pass a bill against sexual violence (RUU TPKS) and ratify the International Labour Organization’s Violence and Harassment in the World of Work convention—two essential steps that will put pressure on businesses to improve working conditions. The network also conducts knowledge-sharing sessions on gender and other labour rights topics. The Indonesia Freedom of Association Protocol (FoA Protocol) is another unique initiative that supports Fair Wear member brands and factories in Indonesia. The protocol is a ground-breaking agreement that has created a new way for clothing brands, factories and trade unions to come together to improve working conditions and factory operations, reduce conflict and strengthen workers’ rights. The Protocol represents an important example of what the future of responsible supply chains might look like.
Since 2022, Fair Wear has phased out the traditional membership services (audits, WEP and complaint handling support in Indonesia. As brands have few other sources to turn to, Fair Wear is continuing its role in providing brands with important information on risks and issues in the Indonesian garment industry. As part of STITCH, Fair Wear will continue to have a local presence in Indonesia. Together with CNV Internationaal under the STITCH partnership, Fair Wear will focus on influencing the government to adopt a law to protect women against violence, combat the shrinking civil space for trade unions and provide support to engage in meaningful social dialogue on wages, job security, and lobby for the incorporation of human rights due diligence and decent work clauses in the Free Trade Agreement between the EU and Indonesia (IEU-CEPA).
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