May 26, 2026
JAKARTA – A labor union leader has warned that massive layoffs may occur in the next three months on account of skyrocketing production costs due to the Middle East conflict, forcing manufacturing companies across Java to downsize or close operations permanently.
Confederation of Indonesian Trade Unions (KSPI) president Said Iqbal said in a press conference on Monday that the cost-cutting measures could potentially affect 9,000 workers in 10 companies in Banten, West Java, Central Java and East Java.
“The driving factor is the war between Iran against the United States and Israel, which has no certainty over when it will end, causing prices of fuel to surge,” stated Said, who is also the chairman of the Labor Party.
The number was an approximation of the reports from the union members who were given early warning about the layoffs, he noted.
Said pointed out that the fuels the industry used were unsubsidized and that their prices started to increase in May. Thus, many companies will be forced to axe workers within the next three months, said the labor leader.
The companies also struggled with raw materials they had to import, which became more expensive not only because of rising international logistics costs due to the rising fuel price, but also a weakening rupiah against the US dollar.
International trade is mostly conducted in dollars but transactions in Indonesia are conducted in rupiah and when the latter weakens, the industry has to spend more just to import.
The Indonesian currency has been on a downward slope since the first missiles were fired on Feb. 28 and has traded at its record low of around Rp 17,700 per dollar for the past week, far below the Rp 16,700 to Rp 16,800 range before the war began.
One company that has fallen victim to the war is PT Xacti Indonesia, formerly known as Sanyo. The company, which has been axing workers since last year due to financial hardships, was forced to close shop permanently this month, 3 months into the war.
Located in Depok, West Java, Xacti has laid off 350 workers, officially ending its production of digital imaging devices, electronic components and printed circuit boards.
Said did not name all 10 companies that are about to cut workers but mentioned PT Shinhwa, PT Lung Cheong Brothers Industrial and PT Parkland World Indonesia as three companies that fired workers this month, all manufacturers of footwear and textile products.
He then said that “even big companies like” PT Nikomas Gemilang in Serang, Banten, had cut 279 of its workers; “but the number of its workers is still large, still in the tens of thousands”.
Said went on to say that Karawang, a manufacturing hub in West Java, alone had recently laid off a total of 1,323 workers.
The wave had also affected the automobile industry in Central and East Java, particularly in showroom and repair shop businesses “due to low car demands and weakening of people’s spending power” and, likewise, expensive component imports, said Said.
He also noted that some companies would “surely” close operations within the next months because “they are losing competitiveness”.