Chinese and Vietnamese competition claims PT Krene, a manufacturer of bags and computer carry cases in Gresik, East Java, which has gone out of business.

The General Manager of PT Krene, Kim Dong Gi, announced formally on the 3rd that the factory, which made export oriented bags and cases, was closing its doors and letting go of all of its 400 workers, due to it being unable to compete with lower priced goods from China and Vietnam.

Workers at the firm, who had been idle since September 9th, accepted the reality of the situation but, concerned about the level of their severance pay, they staged a demonstration outside the factory, blocking its gates for about 4 hours, and a representative from among their number approached members of Commission D of the regional parliament for Gresik, which is near the provincial capital Surabaya. The workers also demanded that they be paid the annual end-of-Ramadhan, or Lebaran, bonus, which acts as a kind of 13th month payment.

Meanwhile Kim Dong Gi of PT Krene said that Indonesian bag products were no longer competitive with those made in China and Vietnam, because, he said, companies in China paid their workers on a piece rate basis, rather than a monthly salary, and this made their costs lower. One example he gave was that of the “Acer 42” bag, which his company sold for $7.80, while Chinese manufacturers managed to sell it for $6.00.

He added that the rise in fuel costs in October of 2005 had hit the company hard, reducing its profit margin from around 12% to, presumably, negative territory.

Update October 10th

It appears the business will not now close down. Some staff will be retained and employed on a piece work basis. Negotiations between labour unions and management are ongoing.